The quantity demanded, but it might not be so significant because going from 25 cents to 50 cents isn't gonna make a big difference for most people's pocket books. Were to go to 50 cents, that would likely reduce Say bubble gum right now is 25 cents, and if it Percentage of your income, say bubble gum, and let's So let's first think about something that makes up a very small So once again, youĬould view elasticity as how sensitive quantity is to price. Go online or whatever else, and so there, people tend toīe more sensitive to price on the longer timeframe, theyĬan find their substitutes, going back to the previous determinant, and so things tend to be more elastic. I can go someplace else and find umbrellas, I could Might say, hey you're trying to really rip me off with those umbrellas and take advantage of me, But over a longer timeframe, so longer timeframe, people So in a short timeframe, in a short, short timeframe, things tend to be less elastic. Probably going to be willing to pay that price, and Then you could probably raise the prices on umbrellas a good bit, and assuming you have good foot traffic, a lot of people are So for thinking about a short timeframe, while it is raining, Now what about timeframe, howĭoes that affect elasticity? Well, imagine that youĪre selling umbrellas and it is raining right now. Reasonably similar quantity, so this would be less, less elastic. Price changes a little bit, or even if it changes a lot, people say well I don't know what IĬould substitute that with, so they might still buy a And you could go the other way around if you have few substitutes. People quantity, I guess you could say, would be very sensitive to price.
Or the McIntosh apples, so when you have many substitutes, that tends to lead to more elasticity. Then people will go to the substitutes, they're more likely to go the the Red Delicious, Percent change in price, would you expect the percent change in quantity demanded of FujiĪpples to change dramatically? Well if there are many substitutes, and only the Fuji apples, say, get a lot more expensive, Well, the other substitutesĪre the other types of apples out there, McIntosh apples and Red Delicious apples, and all of those, and so for a given And we can think of examples in our heads for markets of goods or services where there are many substitutes, let's say it's the market for Fuji apples. So let's imagine first a world where there are many substitutes for the good or service Will generally point to are substitutes, timeframe, income share, whether the market we're talking about is about a luxury or necessity, and the narrowness of a market. To the high elasticity case or closer to the low elasticity case. But let's now think about the factors that might lead us to be closer Which case you would have a vertical demand curve. Think about a perfectly inelastic market in The lower our elasticity, so low elasticity would So low elasticity, the closer and closer we get to a vertical curve, And low elasticity would be that your percentage in quantityĭoes not change much depending on your percent change in price. So this might look something like that, so I'll write that as high, high elasticity elasticity. Look something like this, it would be a flatter demand curve. Would say that you have a large percent change in quantity for a given percent change in price, so high elasticity would So quantity on the horizontal axis, price on the vertical axis, and remember, price elasticity ofĭemand is percent change in quantity for given So let me draw my price and quantity axes that we are pretty familiar Of what an elastic or an inelastic market might look like.
Just give ourselves a little bit of a review Now before we even talkĪbout those determinants or those factors, let's We're gonna think about the determinants of the Videos we have already started talking about the priceĮlasticity of demand, and what we're gonna do in this video is think about theįactors that might drive the price elasticity ofĭemand in a given market to be more or less elastic.
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