Elasticity of Demand Economics. What Does it Mean? Economists: How consumers respond to price...

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Elasticity of Elasticity of Demand Demand Economics Economics

Transcript of Elasticity of Demand Economics. What Does it Mean? Economists: How consumers respond to price...

Page 1: Elasticity of Demand Economics. What Does it Mean? Economists: How consumers respond to price changes. Economists: How consumers respond to price changes.

Elasticity of Elasticity of DemandDemand

EconomicsEconomics

Page 2: Elasticity of Demand Economics. What Does it Mean? Economists: How consumers respond to price changes. Economists: How consumers respond to price changes.

What Does it Mean?What Does it Mean?

Economists: How consumers respond to Economists: How consumers respond to price changes.price changes.

In other words:In other words: Elasticity of demand is how much buyers will Elasticity of demand is how much buyers will

increase or decrease their demand for a good increase or decrease their demand for a good when the price rises or fallswhen the price rises or falls

Page 3: Elasticity of Demand Economics. What Does it Mean? Economists: How consumers respond to price changes. Economists: How consumers respond to price changes.

Inelastic vs. ElasticInelastic vs. Elastic

Inelastic – Inelastic –

unresponsive change in demand when price changes

Elastic – Elastic –

responsive change in demand when price changes

Examples: Examples: clothing, food

Page 4: Elasticity of Demand Economics. What Does it Mean? Economists: How consumers respond to price changes. Economists: How consumers respond to price changes.

Price RangePrice Range Elasticity of demand can vary greatly at different

price ranges

Examples:Examples:

Inelastic Magazine rises 50% : $ .20 to $ .30 Demand shouldn’t change much

Elastic Magazine rise 50%: $4.00 to $6.00 Some people may refuse to pay the $2.00 increase

Page 5: Elasticity of Demand Economics. What Does it Mean? Economists: How consumers respond to price changes. Economists: How consumers respond to price changes.

Factors Affecting ElasticityFactors Affecting Elasticity

1.1. Availability of SubstitutesAvailability of Substitutes

Few substitutes – Demand still goes up with price increases

Example:Example:Tickets to concerts, sporting events

Page 6: Elasticity of Demand Economics. What Does it Mean? Economists: How consumers respond to price changes. Economists: How consumers respond to price changes.

FactorsFactors

2.2. Relative ImportanceRelative ImportanceHow much can you afford to spend on a product?

3.3. Necessities vs. luxuriesNecessities vs. luxuriesNeeds vs. wants

Page 7: Elasticity of Demand Economics. What Does it Mean? Economists: How consumers respond to price changes. Economists: How consumers respond to price changes.

FactorsFactors

4.4. Change over timeChange over time Can’t find substitutes in short term In long term demand becomes elastic

Examples:Examples:Gasoline, ice


1 Stabilization Policy CHAPTER 14. 2 Introduction How should the government policy makers respond to business cycles? Some economists argue that the economy.

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Normal and Inferior Goods Economists classify a good as either normal or inferior, depending on whether consumers spend more or less on that good as.

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Jacaranda Economics ’ Business Alive 8 Victorian ...between consumers and producers in our market system. Economists sometimes refer to this as the circular flow diagram, because

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Unit 2 – Lesson 2. Elasticity The term used by economists to describe how consumers react to price changes. For example, for many products, if the.

Unit 2 – Lesson 2. Elasticity The term used by economists to describe how consumers react to price changes. For example, for many products, if the.

Do Consumers Respond to Marginal or Average Price

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1. THE LOGIC OF MAXIMIZING BEHAVIOR Learning Objectives 1.Explain the maximization assumption that economists make in explaining the behavior of consumers.

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Net Bias and the Treatment of “Mission-Critical” BitsMost consumers favor Internet Service Provider (“ISP”) neutrality and the ... Some economists have tried to prove that

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Did U.S. Consumers Respond to the 2014–2015 Oil Price ...€¦ · examines the response of U.S. consumers to the 2014–2015 oil price shock using representative micro data for

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To What Electricity Price Do Consumers Respond ...faculty.haas.berkeley.edu/borenste/download/NBER_SI_2009.pdf · To What Electricity Price Do Consumers Respond? Residential Demand

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Elasticity- Week Four. Objectives Explore examples of elastic/ inelastic situations Determine how consumers respond to price changes Examine the current.

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Do Consumers Respond to Marginal or Average Price ...home.uchicago.edu/ito/pdf/Ito_Marginal_Average_AER.pdfDo Consumers Respond to Marginal or Average Price? Evidence from Nonlinear

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