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Elasticity of Demand Elasticity of Demand The degree to which price effects demand

Elasticity of Demand The degree to which price effects demand

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Page 1: Elasticity of Demand The degree to which price effects demand

Elasticity of DemandElasticity of Demand

The degree to which price effects demand

Page 2: Elasticity of Demand The degree to which price effects demand

Inelastic DemandInelastic Demand

Demand that is not very sensitive to a change in price

Page 3: Elasticity of Demand The degree to which price effects demand

Elastic DemandElastic Demand

Demand that is very sensitive to a change in price

Page 4: Elasticity of Demand The degree to which price effects demand

Factors That Effect DemandFactors That Effect Demand

1) Availability of Substitutes Is there a lack of substitutes or a wide

choice of substitutes?2) Relative Importance How much of your budget do you spend on

the good? The higher the jump in price, the more you will have to adjust your purchases.

Page 5: Elasticity of Demand The degree to which price effects demand

Factors That Effect DemandFactors That Effect Demand

3) Necessities Versus Luxuries

Is the good a need or a want?

4) Change over Time

Consumers need time to react to a price change and change their spending habits.

Demand tends to become more elastic over time