Price Elasticity of Supply and Demand

OBJECTIVE: Know the

characteristics of elastic demand.

Be able to graph elastic demand.

Know the characteristics of elastic supply.

Be able to graph elastic supply.

Be able to give examples of each.

Elastic vs. Inelastic Demand

ELASTIC DEMAND– SUBSTITUTE

PRODUCTS.– NOT IMPORTANT

ON CONSUMER BUDGET. (NECESSITY)

– LOW CONSUMER LOYALTY.

INELASTIC DEMAND– LITTLE TO NO

SUBSTITUTES.– A NECESSITY OF

LIFE.– HIGH CONSUMER

LOYALTY.

Inelastic Demand

Elastic Demand

Controversial Examples

Consumer Loyalty on Elastic Demand What effect does

consumer loyalty have on the elasticity of demand?

Examine the handout - Building Thinking Skills.

Total Revenue (TR) Formula

TR = Price X Quantity– If Price rises, and

TR rises, it is inelastic demanded.

– If price falls, and TR falls, it is inelastic demand.

If price rises, and TR falls, it is elastic demand.

If the price falls, and the TR rises, it is elastic demand.

Handout 10-2 Elasticity of Demand and Changes in Total Revenue.

Elasticity of Supply

How difficult is it to make a good or service?

Does the amount of money offered to the supplier alter the amount of production?

What are some examples?

Jiro Dreams of Sushi

Elastic or inelastic supply?

Closure

Do the Elasticity of Demand Exercise.