elasticity of demand d. e. weir lawrence central high school
TRANSCRIPT
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