Download Elastic and inelastic demand and supply

ELASTIC AND INELASTIC DEMAND AND SUPPLY
Demand Elasticity is the change in price that
causes a change in the quantity demanded.
However-some things don’t always follow the law
of demand. When prices go up demand DOES
NOT Change.
• Examples: Turkeys on Thanksgiving. If Harris –Teeter
raises the price on turkeys it will not have much of an
effect on the purchase since turkeys are a staple of most
Thanksgiving meals. At other times the demand would be
affected.
• Other examples: pepper, electricity,
and medicines.
***When a product has few or no substitutes then it is
inelastic.
Demand Elasticity: As price changes,
demand changes.
• When people can choose an alternative or substitute then
the product is elastic.
• Luxury items are elastic.
Elasticity of Supply
• Supply of elasticity is a measure of how the quantity
supplied of a good or service is affected by a change in
price.
• Elasticity depends on how quickly a company can change
the amount it produces.
• Ex: oil is supply inelastic. An oil company cannot quickly
dig a new well, repair a damaged oil rig, or build a
pipeline quickly.
• For kites, candy, soft drinks, t-shirts,-supply is elastic.
Suppliers can quickly produce and make these kinds of
goods and will adjust to price changes.
Ask yourself the questionWhat makes a product supply inelastic?
• The inability to increase supply quickly in
response to demand and increased prices.
• Ex: Gas