Elastic and inelastic demand and supply

1. Elastic and inelastic demand and supply Demand Elasticity is the change in price that causes a change in the quantity demanded. However-some things don’t always follow the law of demand. When prices go up demand DOES NOT Change.

2. Examples: Turkeys on Thanksgiving. If Harris –Teeter raises the price on turkeys it will not have much of an effect on the purchase since turkeys are a staple of most Thanksgiving meals. At other times the demand would be affected. • Other examples: pepper, electricity, and medicines. ***When a product has few or no substitutes then it is inelastic.

3. Demand Elasticity: As price changes, demand changes. • When people can choose an alternative or substitute then the product is elastic. • Luxury items are elastic.

4. Elasticity of Supply • Supply of elasticity is a measure of how the quantity supplied of a good or service is affected by a change in price. • Elasticity depends on how quickly a company can change the amount it produces. • Ex: oil is supply inelastic. An oil company cannot quickly dig a new well, repair a damaged oil rig, or build a pipeline quickly. • For kites, candy, soft drinks, t-shirts,-supply is elastic. Suppliers can quickly produce and make these kinds of goods and will adjust to price changes.

5. Ask yourself the question-What makes a product supply inelastic? • The inability to increase supply quickly in response to demand and increased prices. • Ex: Gas