how supply & demand affects prices

How Supply & Demand Affects

Prices

What does it mean to be elastic?

ElasticWhen the demand for a good changes in response

to change in price.

Example

$599.00July 2007

$399.00September 2007

$249.992010

$$$ Price Demand

Inelastic

ElasticWhen the demand for a

good changes in response to change in price.

InelasticWhen the demand for a good …

With a partner try and come up with a definition for inelastic. Remember that we are referring to demand. Try and finish the sentence for inelastic.

does not change (or changes very little) in response to change in price.

$2.502007

$3.502010

With a partner decide if each example is elastic or inelastic.

#1 #2

#3 #4

Elastic or Inelastic

With a partner, come up with other examples of projects that are elastic or

inelastic.

Normal vs. Inferior Goods

Normal Goods

If your income increased what’s the first thing you

would you buy? Finish this sentence with a partner:I would buy a…..

Normal Goods

$249.99This is the projected price

for the next 3 years.

You really want this phone, but you don’t have the

money.

It’s Christmas time and everyone just received

$300 from family. What are you going to buy?

Demand for the phone increases, but the cost stays

the same.

What Does Inferior Mean?

Inferior Goods

Vs.

Vs.

Vs. What is an inferior good?

Normal & Inferior Goods

Normal

Turn to your shoulder buddy and make a list of normal vs. inferior examples.

Inferior Goods

Substitute or Complementary Goods

Substitution Good

$4.99$2.49

Which item would

you purchase?

Why?

If the cost of butter increases, the demand for margarine increases.

$3.75 $1.25

If the cost of coffee increases, the demand for tea increases.

Complementary Good

It’s July 4th and is having a sale on hot dog buns. What are you going to buy to go with the hot dog buns?

Summer 2010, there was a massive recall on peanut butter. People stopped buying peanut butter. What other complementary good would people have stopped buying?

Association Game