1. Bellringer
Elasticity
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)

2. Review: Law of Demand
 Netflix example
 http://news.yahoo.com/behind-increase-why-
netflix-raising-prices-094058403.html

6. 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

7. 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

8. In Reality

9. Summary