1. Elasticity & Price

2. Demand Exercise
When the good is shown on the screen simply vote on if you would buy the good (raise your hand for yes)
Then, after you see the price change, we will vote again

3. $1.00
$3.00

4. $4.17
$2.97

5. $3 $7

6. $6.00
$2.50

7. $50.00
$100

8. $3.00
$1.00

9. $475
$200

10. $10
$20

11. $300
$900

12. Elasticity
Measures how much buyers and sellers respond to a change in market conditions
Goods can be elastic or inelastic

14. Elastic – Quantity for a good changes more, relative to a change in market conditions
If price changes by 10%, then the quantity demanded changes 50%
Inelastic – Quantity for a good changes less, relative to a change in market conditions
If the price changes by 40%, then the quantity demanded changes only by 5%

15. What Affects Elasticity?

16. Amount of Substitutes Inelastic Elastic
The less substitutes there are…
The more substitutes there are…
Inelastic
Elastic

18. Necessities vs. Luxuries
Your needs
Your luxuries or wants
Inelastic
Elastic

19. VS

20. Total Revenue

21. Owner Challenge!!!

22. How would you decide to price this product to get the most money?

23. Demand for Beef Jerky Purse
Price
Demand for Beef Jerky Purse
Total Revenue $1 15 $2 10 $3 8 $4 4 $5 1

24. Find where you will make the most revenue!
Total Revenue
Find where you will make the most revenue!

25. Total Revenue
Price
Quantity Demanded

26. Demand for Beef Jerky Purse
Price
Demand for Beef Jerky Purse
Total Revenue $1 15 $2 10 $3 8 $4 4 $5 1
$15

27. Demand for Beef Jerky Purse
Price
Demand for Beef Jerky Purse
Total Revenue $1 15
$15 $2 10
$20 $3 8
$24 $4 4
$16 $5 1