Notebook # 12 Economics 4-3 Elasticity of Demand

Economics 4-3 Elasticity of Demand ESSENTIAL QUESTION: Why is an understanding of elasticity important for business?

Economics 4-3 Elasticity of Demand GPS STANDARDS: SSEMI3- c.) define price elasticity of demand and supply

Economics 4-3 Elasticity of Demand Consumers react differently to price changes depending on whether the good is a necessity or a luxury. Elasticity measures how sensitive consumers are to price changes.

Economics 4-3 Elasticity of Demand Demand elasticity is the extent to which a change in price causes a change in the quantity demanded.

Economics 4-3 Elasticity of Demand This type of elasticity is typical of the demand for products like green beans, corn, tomatoes, or other fresh garden vegetables. Because prices are lower in the summer, consumers increase the amount that they purchase. When prices become considerably higher in the winter, consumers normally buy fewer fresh vegetables and used canned vegetables instead.

Economics 4-3 Elasticity of Demand Demand is inelastic when a change in price causes a small change in demand.

Economics 4-3 Elasticity of Demand This is typical of the demand elasticity of a product like table salt. A lower or higher price for table salt does not bring about much change in the quantity purchased If the price was cut in half, the quantity demanded would not increase much because people can only consume so much salt. If the price of salt doubled, consumers would demand about the same amount because the portion of a person’s budget that is spent on salt is so small.

Economics 4-3 Elasticity of Demand Why is the demand for insulin is inelastic? There is a lack of adequate substitutes for insulin and regardless of price a type-I diabetic patient must have the insulin or else they will die.