1. Elasticity

2. Elasticity of Demand
Extent to which a change in price causes a change in the quantity demanded
Elastic
Change in price causes a large change in quantity
Inelastic
Change in price causes a relatively smaller change in quantity demanded

3. Elasticity of Demand Inelastic Unit Elastic
Change in price causes a relatively smaller change in quantity demanded
Unit Elastic
Change in price causes a proportional change in quantity

4. Profits
Elastic
Price Increase, what happens?
Inelastic

5. Determinants of Demand Elasticity (What makes a product elastic or inelastic)
Can the purchase be delayed?
Are adequate substitutes available?
Does the purchase use a large portion of income?

6. Elasticity of Supply Unit (Proportional)
Quantity supplied responds to a change in price
Elastic
Change in price=larger quantity brought to mkt
Inelastic
Change in price=smaller change in quantity supplied
Unit (Proportional)

7. Determinants of Supply Elasticity
If a firm can adjust to new prices quickly=
Elastic
If a firm’s adjustment take longer=supply inelastic

8. How is it Different From Demand
Substitutes=no effect
Delay purchase=no effect
Portion of Income=no effect