elasticity of demand d. e. weir lawrence central high school
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Elasticity of Demand
D. E. WeirLawrence Central High School
Definition
ElasticityElasticity
describes the
way that
consumers (you)
respond to price
changes.
Inelastic
A priceincrease willnot changetheconsumer’sdemand.
Elastic
A price
change will
change the
consumer’s
demand.
Graphs
$
Q
$
Q
Inelastic Elastic
Total Revenue Test
Elastic – If you increase price and you get less income.
Inelastic – If you change the price and you have the same or greater income
Total Revenue Test
Pre-Change Price X Quan. Sold = TR
Total Revenue Test
Pre-Change Price X Quan. Sold = TR
$2.00 X 150 =
Total Revenue Test
Pre-Change Price X Quan. Sold = TR
$2.00 X 150 = $300
Total Revenue Test
Pre-Change Price X Quan. Sold = TR
$2.00 X 150 = $300
Post-Change Price X Quan. Sold = TR
Total Revenue Test
Pre-Change Price X Quan. Sold = TR
$2.00 X 150 = $300
Post-Change Price X Quan. Sold = TR
$2.50 X 100 =
Total Revenue Test
Pre-Change Price X Quan. Sold = TR
$2.00 X 150 = $300
Post-Change Price X Quan. Sold = TR
$2.50 X 100 = $250
Was there a significant change in Revenue? Yes = Elastic No = Inelastic
Factors Affecting Elasticity
Availability of substitutes Relative importance Necessities vs. luxuries Time
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