Economics: Elasticity of Demand Analysis

Overview:

As you have already learned in Chapter 4, the price elasticity of demand, a measure of the responsiveness of quantity demanded to a price change, may cause a change in price to have a small or large impact on quantity demanded.

Inelastic goods such as gasoline are still purchased in approximately the same quantity even when prices rise.

Elastic goods such as restaurant meals, movie tickets, and luxury items usually follow the law of demand and will see a drop in quantity demanded when prices rise.

Assignment: Steps A through E

A. Read the following article Price Elasticity of Demand here:

http://www.mackinac.org/article.aspx?ID=1247

B. Complete the worksheet about inelasticity using data from the article above. (The worksheet will be handed out in class) You will hand these in to your teacher at the end of this activity.

C. Answer the following six (6) questions in a Word Document, referring to information in the article..

1. Which products are the most inelastic?
2. What factors would most likely explain why salt is very inelastic?
3. Why would the demand for tooth picks be inelastic?
4. Although both short-run and long-run gasoline are both inelastic, why is short-run gasoline more inelastic than long-run gasoline?
5. What factors would likely explain why Chevrolet cars are very elastic?
6. Why would tires have unitary elasticity while gasoline is inelastic?

D. Hand in your results from step B to your teacher and the answers to step C to your teacher

Extra Credit:

E. Verbally pay a sincere compliment to someone in the class that you don't know well before handing in your work.