Application or uses of the concept of elasticity

1. APPLICATION OR USES OF THE
CONCEPT OF ELASTICITY

2. APPLICATION OR USES OF THE
CONCEPT OF ELASTICITY
Application or uses of the concept of elasticity are
as follows:
 Economics
 Government and finance minister
 Education
 Technology
 Price elasticity of health services
 Environmental economics
 Engineering
 Transportation
 International trade
 Trade Unionists

3. ECONOMICS

4. ECONOMICS
 Elasticity in Economics measures How the quantity
demand changes that affect the changes in the
price, income or other relevant factors.
 This information is crucial for business and policy
maker in making decisions about pricing, taxation
and other economic policies.
 Price elasticity of demand: Helps businesses and
policymakers understand how change in price
affect the quantity demanded for a good or service.
 Income elasticity of demand: Measures the
responsiveness of quantity demanded to changes
in the income of the consumer.

5. GOVERNMENT AND FINANCE
MINISTER

6. TO THE GOVERNMENT AND FINANCE
MINISTER
 The elasticity of demand in the context of
government and finance minister refers to how
changes in price or fiscal policies affect the quantity
of goods and services demanded. If demand is
elastic, it means that people or businesses are
responsive to price changes or economic policies.
In government, understanding this concept helps in
formulating effective taxation and spending policies.
Finance ministers often use elasticity insights to
predict the impact of policy decisions on consumer
behavior and overall economic activity.

7. TAXATION POLICY
 The elasticity of demand helps to determine
the impact of taxes on consumer behavior.
 Example:
 If the government taxes luxury cars, which
typically have elastic demand, the tax
increase might lead to a proportionately larger
decrease in the quantity demanded. In
contrast, taxing essential goods like basic
groceries, often inelastic, may not significantly
reduce consumer purchases.

8. REVENUE FORECASTING
 Finance ministers use elasticity to project changes in
tax revenue.
 Example:
 If a finance minister is considering increasing the tax
on cigarettes, understanding the elasticity of demand
for cigarettes is crucial. If the demand is elastic, a tax
hike could result in a significant reduction in smoking,
potentially impacting tax revenue.

9. PUBLIC GOODS PROVISION
 Goods with inelastic demand that are considered
essential (like certain healthcare services),
governments may allocate more resources or funding
to ensure their availability, recognizing that demand is
less responsive to price changes.
 Example:
 For a country investing in healthcare, knowing the
elasticity of demand for essential medications is
essential. If the demand is inelastic, the government
might need to actively ensure the availability and
affordability of crucial medicines.

10. EDUCATION

11. PRICE ELASTICITY OF EDUCATION
 Price elasticity of education refers to the
responsiveness of the quantity demanded or
supplied of education to a change in its price. It
measures how sensitive the demand or supply of
education is to changes in its cost. The concept is
derived from economic principles and is a key
element in understanding how changes in the cost
of education can impact enrollment levels and
educational outcomes.

12.  The formula for price elasticity of demand (PED) is:
 PED=%change in quantity demanded/%change in
price
 Similarly, the formula for price elasticity of supply
(PES) is:
 PES=%change in quantity supplied/%change in
price

13. ELASTIC VS. INELASTIC DEMAND:
 If the demand for education is elastic (PED > 1), it
means that the percentage change in quantity
demanded is proportionally greater than the
percentage change in price. In other words,
consumers are relatively responsive to changes in
the cost of education.
 If the demand is inelastic (PED < 1), it indicates that
the percentage change in quantity demanded is
proportionally less than the percentage change in
price. In this case, consumers are less responsive
to changes in price.

14. TECHNOLOGY

15. TECHNOLOGY
 Elasticity of demand for technology products:
 The elasticity of demand for technology products
measures how sensitive the quantity demanded is
to changes in price. If demand is elastic, a price
increase leads to a relatively larger decrease in
quantity demanded, and vice versa. This concept
guides technology companies in setting prices and
devising innovation strategies.

16.  For example, if a company identifies its product as
having implement elastic demand, it may choose to
dynamic pricing or offer discounts to stimulate
demand. On the innovation front, understanding
elasticity can guide the development of features that
justify premium prices for less price-sensitive
consumers or cost- effective alternatives to attract
more price-sensitive segments.
 For example : Consider smart phones: if the price of
a popular model increases, demand may remain
relatively stable due to brand loyalty and perceived
necessity, indicating inelastic demand. Conversely, for
non-essential tech gadgets, a price hike may
significantly decrease demand, reflecting elastic
demand.

17.  Conversely, if a technology product has inelastic
demand, meaning consumers are less responsive
to price changes, the company might explore
premium pricing strategies, knowing that demand is
relatively stable even with price increases. In terms
of innovation, the focus may be on enhancing
product features to reinforce its perceived value.
 Overall, a nuanced understanding of elasticity
enables technology companies to make informed
decisions about pricing and innovation, tailoring
strategies to the specific demand characteristics of
their products.

18. MERITS:
 Innovation Adoption: High elasticity allows for
easier adoption of new technologies, as consumers
are more responsive to price changes. This fosters
innovation and competition in the tech market.
 Market Competition: Elastic demand encourages
companies to strive for efficiency and cost-
effectiveness, fostering competition. This can result
in lower prices, improved quality, and a wider
variety of technological options for consumers.

19.  Price Sensitivity: Elastic demand indicates that
consumers are sensitive to price changes. This
sensitivity can be leveraged by companies through
strategic pricing, promotions, and bundling to attract
a larger customer base.
 Responsive Pricing: Firms can adjust prices
without experiencing significant declines in
demand, enabling them to respond to changing
market conditions or production costs more
effectively.

20.  In conclusion, understanding elasticity helps
businesses set optimal prices and anticipate
consumer behavior in the dynamic tech market.
Balancing pricing strategies with consumer
preferences is crucial for long-term success in this
rapidly evolving industry.

21. PRICE ELASTICITY OF HEALTH
SERVICES

22. PRICE ELASTICITY OF HEALTH
SERVICES
 Informs healthcare providers and policymakers
about how changes in the cost of healthcare
services affect the demand for those services.
 The price elasticity of health services measures
how much the quantity demanded or utilized of
these services changes in response to a change in
price. It is calculated as the percentage change in
quantity demanded divided by the percentage
change in price.

23. IN THE CONTEXT OF HEALTH SERVICES, ELASTICITY IS
INFLUENCED BY SEVERAL FACTORS:-
1. Necessity of Services
2. Availability of Substitutes
3. Income Levels
4. Time Horizon
5. Insurance Coverage

24. MERITS OF PRICE ELASTICITY OF HEALTH
SERVICES:-
 Resource Allocation:-
 Enables healthcare providers to allocate resources more
efficiently by anticipating shifts in demand for various
services in response to price changes.
 Consumer Behavior Understanding:-
 Provides insights into consumer behavior, allowing
healthcare professionals to better understand how
patients respond to changes in the cost of health
services.
 Budget Planning:-
 Assists individuals, healthcare organizations, and
governments in budget planning by predicting how
changes in healthcare prices may influence
expenditures.

25. DEMERITS OF PRICE ELASTICITY OF
HEALTH SERVICES:-
 Health Inequality:-
 If price changes lead to unequal access to
healthcare, it can exacerbate health disparities, as
those with lower incomes may be more adversely
affected.
 Time Lag:-
 Elasticity may not be immediately apparent,
especially in cases of urgent medical needs. The
time lag between price changes and observable
effects can be a limitation.

26. ENVIRONMENTAL ECONOMICS

27. APPLICATION OF ELASTICITY IN
ENVIRONMENTAL ECONOMICS
 Introduction:
 Elasticity, a fundamental concept in economics,
plays a crucial role in the field of environmental
economics. Elasticity in environmental economics
helps us figure out how people and businesses
react to changes in the environment or policies. It's
like understanding if they will use more eco- friendly
products when prices change or if they'll adopt
cleaner technologies if given certain incentives.
This helps design rules and plans that encourage
both a healthy environment and a strong economy.
Essentially, elasticity guides us in finding the best
ways to balance economic activities with taking
care of the environment.

28. EXAMPLES:
1. Price Elasticity of Demand for Renewable
Energy:
 The price elasticity of demand for renewable energy
tells us how much people change their use of clean
energy (like solar or wind power) when the prices
go up or down. If demand doesn’t change much
with price shifts, it’s inelastic; if it changes a lot, it’s
elastic. This helps us understand how sensitive
people are to the cost of using eco-friendly energy
sources, which is important for making renewable
energy more accessible and widely used.

29. 2. Income Elasticity and Conservation Efforts:
 Income elasticity and conservation efforts help us
see how much people’s willingness to support
conservation (like wildlife preservation or eco-
tourism) changes as their income goes up or down.
If people are more likely to contribute to
conservation when they earn more, the income
elasticity is positive. Conversely, if conservation
efforts decrease when incomes drop, the elasticity
is negative. This information helps design strategies
that align with economic conditions to encourage
sustainable choices for the environment.

30. CONT…
3. Cross-Price Elasticity in Transportation
Choices:
 Cross-price elasticity in transportation choices
helps us understand how people’s decisions to use
public transport or private cars are influenced when
the prices of these options change. If a rise in car
prices leads more people to use public transport,
the cross-price elasticity is positive. Conversely, if
car price increases result in fewer people using
public transport, it’s negative. This insight helps
policymakers figure out how connected these
transportation choices are and how pricing changes
can encourage more sustainable travel decisions.

31. CONT…
4. Elasticity of Agricultural Practices:
 In agriculture, elasticity refers to how much farmers
change their methods or production when faced
with shifts in factors like prices or technology. For
example, if farmers easily switch to using more
sustainable practices when there’s a demand for it,
the elasticity of agricultural practices is high.
Understanding this elasticity helps policymakers
encourage eco-friendly farming by considering how
responsive farmers are to different incentives or
changes in conditions.

32. ENGINEERING

33. ENGINEERING
 Elasticity is used in engineering to design materials and
structures that can withstand stress and strain.
Engineers use elasticity concepts to ensure the
durability and safety of various constructions, such as
bridges, buildings, and machinery.
 In engineering, the concept of elasticity is
fundamental and finds various applications:
 Material Design and Selection: Engineers use
elasticity to understand how materials respond to
stress and strain. This knowledge is crucial in
selecting materials for specific applications, ensuring
that they can withstand the expected loads without
permanent deformation.

34.  Structural Analysis: Elasticity is applied in
structural engineering to analyze and design
buildings, bridges, and other structures. It helps
engineers predict how structures will deform under
different loads, ensuring they meet safety and
performance standards.
 Mechanical Design: In mechanical engineering,
elasticity is used in the design of components and
systems to ensure they can handle mechanical
loads without failure. This includes considerations
for factors like fatigue, impact, and thermal stress.

35.  Geotechnical Engineering: In soil mechanics,
elasticity is applied to understand how soils deform
under different loads. This information is essential
in designing foundations for structures, tunnels, and
other geotechnical projects.
 Aerospace Engineering: Elasticity is critical in
aerospace engineering for designing aircraft
components and ensuring structural integrity under
various conditions, including aerodynamic forces,
turbulence, and thermal stresses.

36. TRANSPORTATION

37. APPLICATION OF ELASTICITY IN
TRANSPORTATION
 In transportation, the elasticity of demand is crucial
for understanding how changes in price or other
factors impact the quantity of transportation
services demanded.
 If transportation demand is elastic, a price increase
might lead to a significant decrease in the quantity
of transportation services requested, and vice
versa. This sensitivity can influence decisions
related to pricing strategies, infrastructure
investment, and policy-making.

38.  For example, in situations where demand for a specific
mode of transportation (like buses or trains) is elastic,
fare increases might result in a notable drop in ridership.
On the other hand, if demand is inelastic, changes in
price may have a limited effect on the quantity of
transportation services utilized.
 Understanding the elasticity of demand in transportation
is essential for efficiently managing and planning
transportation systems to meet the needs of users and
optimize resource allocation.
1. Price Impact: Elastic demand in transportation means
that a change in prices (fares, tolls, etc.) has a
significant impact on the quantity demanded. Inelastic
demand implies that price changes have a less
pronounced effect on transportation usage.

39. 2. Revenue Considerations: Elastic demand may
lead to complex revenue considerations. For
instance, lowering prices in an elastic market
could increase total revenue due to a substantial
rise in demand, while in an inelastic market,
increasing prices might result in higher revenue.
3. Policy Planning: Understanding elasticity helps
policymakers make informed decisions. For
instance, if a city aims to reduce traffic congestion,
knowing the elasticity of demand for various
transportation modes can guide the
implementation of tolls or incentives.

40. 4. Infrastructure Investment: Elasticity influences
decisions about investing in transportation
infrastructure. In an elastic market, where demand
is responsive to price changes, investing in
efficient and attractive transportation options
becomes crucial.
5. Consumer Behavior: Elasticity insights are
valuable for predicting how consumers might react
to changes, helping transportation providers tailor
services and pricing structures to better meet
demand and optimize resource utilization.

41. INTERNATIONAL TRADE

42. INTERNATIONAL TRADE
 Elasticity of demand in international trade refers to
how responsive the quantity demanded of a good is
to changes in price. If demand is elastic, a price
change will significantly impact quantity demanded,
influencing trade dynamics. Countries often
consider demand elasticity when setting trade
policies and adjusting prices to enhance
competitiveness in the global market.

43. OBJECTIVES
 The objectives of considering elasticity of
demand in international trade include:
1. Price Competitiveness: Understanding demand
elasticity helps countries set competitive prices for
their exports, aiming to attract foreign buyers and
increase market share.
2. Revenue Maximization: Governments may aim
to maximize revenue by adjusting tariffs or taxes
based on the elasticity of demand, ensuring
optimal income from international trade.

44. CONT…
3. Trade Balance: Assessing elasticity helps in
managing trade imbalances by adapting pricing
strategies to boost exports or control imports,
maintaining a stable balance of trade.
4. Policy Formulation: Policymakers use elasticity
data to formulate effective trade policies,
balancing economic objectives and ensuring the
overall welfare of their country’s economy.

45. TRADE UNIONISTS

46. TRADE UNIONISTS
 The concept of price elasticity is useful to trade
unions in wage bargaining. The union leaders,
when they find that demand for their industry's
product is fairly elastic, will ask for a higher wage to
workers and use the producer to cut the price and
increase sales which will compensate for his loss in
total profit.
 Trade unions are organisations of workers that help
their members represent themselves and negotiate
with their employers to obtain better benefits for
affiliated workers. In some countries, it is also
called a labour union.

47. ADVANTAGES
 Reduced Economic Inequality:
 Trade unions benefit the economy. As unions fight
for wage rates and better working conditions,
raising workers' living standards usually helps
reduce economic inequality.
 Guaranteed Job Security:
 Unions can also help guarantee job security. It is
unethical and illegal for an employer to terminate an
employee who is a union member and has
contacted their union with such issues until the
matter is resolved.

48. DISADVANTAGES
 Productive time can be lost:
 Unions repeatedly resort to employees going on
strikes, rallies and meetings to press their
demands, which can happen during working hours
when workers are not working, leading to a loss of
productive time.
 Right Pay Demands:
 Unions have the power to demand the right pay
because it is an association of a group of workers.
In economics, the higher the demand, the greater
the supply chance. The same is true for trade
unions: the more employees demand their rights,
the greater the chances of being enforced.

49. THANK YOU