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Topic Menu | | Unit 1: An Overview | | Elasticity And Demand
Price Elasticity Of Demand
Upon Further Review
Unit 1 Review
| | Unit 2: The Continuum | | Relative Adjustments
Five Alternatives
Three Of Five
Two Of Five
Unit 2 Review
| | Unit 3: Measurement | | Some Demand Numbers
Midpoint Elasticity
A Range Of Values
The Demand Curve
Five Alternatives
Slope And Elasticity
Changing Elasticity
Total Revenue
Expenditures And Elasticity
Unit 3 Review
| | Unit 4: Elasticity Determinants | | Three Determinants
Substitute Availability
Time Period
Budget Proportion
Unit 4 Review
| | Unit 5: Other Measures | | Price Elasticity Of Supply
Income Elasticity Of Demand
Cross Elasticity Of Demand
Unit 5 Review
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Elasticity and Demand
Like a lot of people (stock brokers, movie producers, business executives, and college students), I make use of cellular telephone communications. After investigating an assortment of companies providing cell phone service, including OmniCell, Tsunami Talktone Telephone (3T), and Voice for Less, I opted for Digital Distance. Up to now, I've been quite happy with Digital Distance. I use (that is, buy) about 500 minutes each month for 10 cents a minute. I've been a loyal customer. I've enjoyed being part of the Digital Distance "family." But they've hurt my feelings. I'm sad and depressed. I don't have the will to get out of bed in morning They've raise their price from 10 cents a minute to 11 cents a minute. I'm taking this price increase personal and I feel as though I should do SOMETHING. But what? One option would be to talk less, reducing the amount of airtime I purchase from Digital Distance. Another option would be to switch to another cellular telephone service, like OmniCell or 3T. While my situation might be an extreme example, most consumers are also sensitive when it comes to price changes. Their feelings might not be hurt over higher prices, but they are prone to take action, usually changing the quantity demanded. How much buyers alter their quantity demanded, how sensitive they are to price changes, is the topic of this lesson -- elasticity and demand.
Elasticity is the relative responsiveness of one variable to changes in another variable. Economists find this notion of elasticity quite useful in the study of markets. In this lesson, we examine the basics of demand elasticity, especially the price elasticity of demand.- The first unit of this lesson, An Overview, gets us started with a review of several concepts related to elasticity and demand.
- In the second unit, The Continuum, we take a close look at how the five elasticity alternatives are reflected by demand curves.
- The third unit, Measurement, runs through some numbers for measuring the price elasticity of demand, and how elasticity values related to a straightline demand curve.
- The fourth unit, Determinants, examines how the three determinants of elasticity affect the elasticity coefficient.
- The fifth unit and final unit, Other, closes this lesson by introducing examine three related elasticity measures.
Learning ObjectivesThe relation between elasticity and demand can be better understood through these ten learning objectives. - The price elasticity of demand as the elasticity measurement for demand.
- How the coefficient of elasticity can be used to identify the five elasticity alternatives -- perfectly elastic, relatively elastic, unit elastic, relatively inelastic, and perfectly inelastic.
- How supply shifts have different results for different demand elasticities.
- Why the five elasticity alternatives are reflected by demand curves with different shapes.
- Why the endpoint and midpoint formulas generate different elasticity coefficients for demand.
- That a straightline demand curve contains all five elasticity alternatives.
- The relation between slope and elasticity.
- The relation between the five elasticity alternatives and total expenditures on a good.
- How the three elasticity determinants affect the coefficient of elasticity.
- Three other useful elasticity measures -- price elasticity of supply, income elasticity of demand, and cross elasticity of supply.
    
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