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ELASTICITY
Sensitivity to Change
Price Elasticity of Demand
Sensitivity to changes in price
 Elastic
 Inelastic
 Elasticity & Revenue
 Use to determine your price –

• Computer ink
• Seminar charges
Other Demand Elasticities
Income
 Cross

– Antitrust cases
Total revenue and Elasticity
If demand is elastic, and increase in
price will lead to a decrease in total
revenue. If demand is inelastic – just
the opposite.
 The mineral spring Question

Public Policy
Cigarettes
 Energy again
 Price Elasticity
 Income Elasticity

Price Elasticity of Supply

The price of inputs
– What does it mean to say that the price
elasticity of supply is unit elastic?
Why should you care?
Avoid mistakes – a higher price is no
guarantee of higher revenue
 Interpreting data scanners
 Solve puzzles – property crime and
drug use
