elasticity
Post on 14-Nov-2014
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BellringerElasticity
How responsive to price changes are you?1. Which goods would you still buy if they
quadrupled in price AND WHY?Toothpaste ($2)
New XBOX & PS3 Video Games ($49)Notebook paper ($0.10)
Burger King Whoppers ($1.99)Art Supplies ($8)
New Washing Machine ($400)
Review: Law of Demand
Netflix example http://news.yahoo.com/behind-increa
se-why-netflix-raising-prices-094058403.html
Read hand out
Elastic Demand Very responsive
to price change Most normal
goods Many
substitutes Why important
to think about as a firm?
Price/month
Quantity
D-nice apartments
1000
500
100
1000 5000 10,000
Read hand out Inelastic Demand
Not responsive to price change
Few substitutes Necessities Ex: lifesavers Why does
government often control prices of inelastic goods?
Illegal drugs?
Price/dose
Quantity
D-dialysis100
1 2 3
200
300
400
500
600
700
In Reality
Summary
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