Price Elasticity of Demand. Elasticity  What do you mean by elasticity?  Name me something that has elasticity?

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Price Elasticities of Demand

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Presentation transcript:

Price Elasticity of Demand

Elasticity  What do you mean by elasticity?  Name me something that has elasticity?

Game Rules  Groups of 4.  Each group will have a basketball, volleyball and a ruler to measure.  Think of a way to measure their elasticity.  Complete Worksheet 1.

Game Rules  Complete worksheet 2.  Calculate the PED and make suggestion whether the firm should increase/decrease price to raise sales revenue (each group should just calculate the point corresponding to their group number to save time).

Definition  Price Elasticity of Demand  the measurement of the responsiveness of the quantity demanded of a good to a change in its price, other thing remains constant.

Definitions  Elastic demand  the percentage change in the quantity demanded exceeds the percentage change in price.  Inelastic demand  the percentage change in the quantity demanded is less than the percentage change in price.  Unitary elastic demand  the percentage change in quantity demanded is the same as the percentage change in price.