2. I want to talk about two products for the next ten minutes. Insulin andBicycles

3. PP Q Q Insulin Bicycles 10 m $1 $2 $3 D $300 100 $200 200 $100 500 D

4. PP Q Q InsulinBicycles 10 m $1 $2 $3 D $300 100 $200 200 $100 500 D One has few substitutes and one has many? Few substitutesMany substitutes One is a necessity and the other is a luxury? NecessityLuxury One is expensive and the other is inexpensive InexpensiveExpensive INELASTIC ELASTIC

5. PP Q Q Insulin Bicycles 10 m $1 $2 $3 D $300 100 $200 200 $100 500 D PQ $310m $210m $110m PQ $300 100 $200 200 $100 500 x x = = TR $10m $20m $30m $30,000 $40,000 $50,000x x x x x x

6. Elasticity Coefficient Q1 – Q2 Q1+Q2 P1 – P2 = Ed Ed>1 = elastic Ed<1 = inelastic Ed = 1 unit elastic Ed = 0 perfectly inelastic 2 P1+P2 2

7. Who needs to know this information? Businesses Governments Why?