Elasticity of Demand

Elasticity measures how much the quantity

demanded of a good changes when price changes.
• For a very elastic good, a small change in price
will result in a large change in quantity demanded
(what sort?).
• For an inelastic good, a change in price will have
little effect on quantity demanded (what sort?)
 Elasticity (cont…)
What might be some examples of elastic
and inelastic goods? What might the curves
of highly elastic and highly inelastic goods
look like?

(Disneyland Example)
 Perfect Elastic And Inelastic
Demand
 If demand for a good is perfectly inelastic,
people will buy the same amount regardless
of the price (show graph).
 If demand for a good is perfectly inelastic,
people will buy an unlimited quantity at one
price, but nothing if the price changes at all.
 Why is Elasticity of Demand
Important?
As we have looked at, elasticity of demand
is people’s responsiveness to price changes.
What advantage might a company have if it
knew the price elasticity of demand of all of
its products?
 Classwork
Is demand for the following goods probably inelastic or
elastic? Why?
• Medicine that your sister needs but only one company makes.
• A can of Coca-Cola.
• A limited edition Boston Red Sox World Series Championship T-
Shirt.
• A family SUV that costs a large percentage of your dad’s income.
• Electricity in Santo Domingo.
• A daily newspaper.
• A ticket to a Licey game.
• Cigarettes for someone addicted to nicotine.