chapter 3 elasticity of demand. elasticity – the degree to which changes in price affect the...
TRANSCRIPT
Chapter 3
Elasticity of Demand
Elasticity – the degree to which changes in price affect the quantity demanded by consumers
Elastic Goods - Small change in price causes a major, opposite change in demand.
Inelastic Goods - Change in price causes little impact in the quantity demanded.
Elastic Goods
Goods tend to be elastic if:
- There are available substitutes.
Ex. pan dulce
-Product is a large portion of consumer’s income – houses or cars (think SUVs)
-Item is a luxury good
*Elastic goods tend to have a flat or almost horizontal demand curves
Goods or services tend to be inelastic if:- The product is a necessity – insulin- There are few or no readily available substitutes - gasoline- Product’s cost represents a small proportion of consumer’s income -
salt
*Inelastic goods tend to have steep or almost vertical demand curves
Inelastic Demand