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Demand Elasticity

This lesson explores demand elasticity, examining how price changes impact the quantity demanded for various products such as salt, cars, fresh veggies, pencils, DVDs, and utilities. Through a chart, learners will fill in their own quantity demanded based on price shifts, identifying examples of elastic, inelastic, and unit elastic demand. Key determinants, including the availability of substitutes, necessity of the purchase, and its effect on income, will be discussed to illustrate how consumers make purchasing decisions.

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Demand Elasticity

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  1. Demand Elasticity Unit Two, Lesson Three Economics

  2. Look at the Following Chart and Fill in Your Qd for One Year Product Beg. Price Qd for 1 yr Salt $1.50/lb Car $30,000 Fresh veggies $.50/lb Pencils $1.00/pack 10 DVD $12 Utilities $60/mo (water and electricity)

  3. Now show how much you would buy given the price changes Product Beg. Price Qd for 1 yr New Price New Qd Salt $1.50/lb $3.00 Car $30,000 $40,000 Fresh veggies $.50/lb $3.00/lb Pencils $1.00/pack 10 $3.00/pack 10 DVD $12 $20 Utilities $60/mo $500/mo (water and electricity)

  4. Demand Elasticity • Demand elasticity is the extent to which a change in price causes a change in quantity demanded • How much does price influence how much we buy of a product

  5. Demand Elasticity • Elastic Demand—when a given change in price causes a relatively larger change in Qd • Inelastic Demand—when a given change in price causes a relatively smaller change in Qd • Unit Elastic—when a given change in price causes a proportional change in Qd

  6. Determinants of Demand Elasticity • Can the purchase be delayed? --If yes, demand tends to be elastic --If no, demand tends to be inelastic • Are adequate substitutes available? --If yes, demand is usually elastic --If no, demand is usually inelastic

  7. Determinants of Demand Elasticity • Does the purchase use a large portion of income? --If yes, demand tends to be elastic --If no, demand tends to be inelastic

  8. Graphical Representations

  9. Graphical Representations

  10. Examples • What is something that you would still buy, even if there was a drastic increase in price? • What is something you would stop buying or limit your purchase of if there was just a small change in price?

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