Elasticity

Recall The Incredibles? Think Elastigirl.: Recall The Incredibles? Think Elastigirl. Elasticity measures the flexibility of consumers and producers when the price changes.

Real World Examples

Golf

To some degree, the price elasticity of demand depends on consumer preferences. For instance, sports fans are often willing to shell out big bucks to follow their passions. In golf, amateurs can play the same courses as professional golfers. But the opportunity to golf where the professionals play does not come cheap.

As an example, a round of golf on the Tournament Players Club at Sawgrass, a famous course in Florida, costs close to $300 for the greens fee and cart.Why do some golfers decide to shell out that much? For an avid golfer with the financial means, the experience of living out the same shots as seen on television is worth the $300. In this case, demand is inelastic.
Flatscreen TVs

Price is a critical element in determining what we can afford. For instance, a 60” TV can cost as much as $3,000, so shoppers are generally willing to spend time trying to find the best deal. Because of the cost, even a small percentage difference in the price can cause a relatively large change in the number of units sold.

A “10% off sale” may not sound like much, but when purchasing a big-ticket item like a TV, it can mean hundreds of dollars in savings. In fact, the demand for expensive items is usually elastic, or sensitive to price changes. The willingness to shop for the best deal indicates that the price matters, so demand is elastic.

prev 1 of 2 next

Advice for Students

Anonymous asked:
What criterion determines whether demand for a prod...: Dirk Deciphers: Recall that the purpose of the price elasticity of dem... more

Ask Dirk! or View More

Ask Dirk Now!

Econ Media Library: Check out multimedia tools, videos and more in our Media Library