1. S&D Demand Elasticity *True or False?* 1.If the price of shoes goes up, demand for shoes will go up. 2. You will begin to experience diminishing marginal utility on your 3 rd scoop of ice cream. 3.Pepsi & Coke are complimentary goods.

2. Elastic Price of product is elastic if there are dramatic changes in demand w/different prices –Name a product that you’d STOP buying if the price doubled. In elastic: not dramatic changes w/ different prices –Name a product that you’d STILL buy if the price doubled.

3. Determining Elasticity: % change in quantity % change in price If the elasticity is greater than 1.0 = elastic If the elasticity is between zero and1.0 = IN elastic

4. What makes something elastic? 1.Substitutes : more substitutes, more elastic in price If Tylenol doubles in price, what will consumers do? If gas doubles in price, what will consumers do?

5. 2. Share of consumer’s budget If toilet paper doubles in price, what will most consumers do? –TP is a relatively small portion of income (also, no substitutes) If cigarettes double in price, what will most smokers do? –Those addicted, will continue BUT new smokers (teens) may never start b/c it’s a large chunk of their income

6. 3. Time Given time, new sub’s will be created –Oil prices rise, w/time new technology will sub for gas EX hybrids, electrics, etc. In short run – gas is inelastic & in long run more elastic w/ more subs

7. Are tires elastic OR inelastic? Why?

8. Tires are Short term inelastic Price changes probably have little effect on demand in the short term. This refers to the slope of the demand curve.

9. Oil Oil is inelastic because it is extremely useful. Pointing out how hard/costly not using oil is goes against global warming action. Oil has saved millions of lives Think about: -medical technology - Hans Rosling’s talks on: 200 years, 200 countries The Washing Machine

10. Price Elasticity of Demand Answer the following questions using the info on Table 5: –List 2 items that are the most elastic. Why might those items be so elastic? –List 2 items that are the least elastic. Why might those items be so INelastic?