Elasticity
Recall The Incredibles? Think Elastigirl. Elasticity measures the flexibility of consumers and producers when the price changes.
Recall The Incredibles? Think Elastigirl
REAL WORLD EXAMPLES
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Flatscreen TVs
Price is a critical element in determining what we can afford. For instance, a 60” TV can cost as much as $3000, 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.