Module 5: Elasticity
Section outline
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Anyone who has studied economics knows the law of demand: a higher price will lead to a lower quantity demanded. What you may not know is how much lower the quantity demanded will be. Similarly, the law of supply states that a higher price will lead to a higher quantity supplied. The question is: How much higher? This chapter will explain how to answer these questions and why they are critically important in the real world.
Upon completion of this module, you will be able to:- Calculate the price elasticity of demand
- Calculate the price elasticity of supply
- Differentiate between infinite and zero elasticity
- Analyze graphs in order to classify elasticity as constant unitary, infinite, or zero
- Analyze how price elasticities impact revenue
- Evaluate how elasticity can cause shifts in demand and supply
- Predict how the long-run and short-run impacts of elasticity affect equilibrium
- Explain how the elasticity of demand and supply determine the incidence of a tax on buyers and sellers
- Calculate the income elasticity of demand and the cross-price elasticity of demand
- Calculate the elasticity in labor and financial capital markets through an understanding of the elasticity of labor supply and the elasticity of savings
- Apply concepts of price elasticity to real-world situations.
To achieve these objectives: [Edit these items to match your resources and activities.]
- Read the Module 5 Introduction
- Read Chapter 5 in the course textbook, Microeconomics.
- Complete Module 5 Discussion.
- Complete Module 5 Quiz.
- Complete the Module 5 Assignment.
- For course instructors, list any other reading assignments here. [Include all reading assignments here that are outside of Moodle. Be as
concise as possible. More information can be included in the
third-party section below, if necessary.]
- Complete the [specific activities in the module. Include all in the order you want them completed.]
Module Pressbooks Resources and Activities
You will find the following resources and activities in this module at the Pressbooks website. Click on the links below to access or complete each item.
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Students mustMark as done
Chapter 5 of Microeconomics.
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Students mustMark as done
Module 5 In Class Activity (hide from students)
Course SLO 1: Identify the basic economic principles that serve as the foundation of economic analysis
Course SLO 2: Understand the interaction of supply and demand in determining prices and the role of prices in coordinating economic activity
Course SLO 6: Discuss the basic theories behind consumer and producer behavior
Module SLO: 5.2.2 – Analyze Graphs in order to classify elasticity as constant, unitary, infinite or zero
Module SLO: 5.4.3 – Apply concepts of price elasticity to real-world situations
Chapter 5 covers the topic of elasticity, which calculates the correlation between the quantity demanded or supplied of a good with some other variable. For this discussion, your task is to:
- Pick one type of elasticity and a good (or pair of goods)
- Describe what you would expect elasticity to look like for the good(s) and explain why you think it would look that way for your selected good(s).
Hints: The most popular types of Elasticity are:
- Price Elasticity of Demand (or Supply)
- Income Elasticity of Demand
- Cross-Price Elasticity
Classifications of Elasticity include constant, unitary, infinite, and zero
Instructor Notes:
This prompt is open for students to take where they want to. After picking their own good or service, they must consider whether they think their good is elastic or inelastic as well as the degree to which it is elastic or inelastic. If the students select income elasticity, they will need to explain whether they think their good is a normal or inferior good. For Cross-Price Elasticity, students will try to consider whether goods are complements and substitutes and then explain why, from the elasticity viewpoint.
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