Elasticity Exercise
Ying Fang ECO/553 Economics for Managerial Decision Making Professor: Bon-Tai Truongson May 8, 2003 Elasticity Exercise Elasticity Exercise After read the book - Introduction to Economics, I have better understanding of what price elastic and price inelastic are, and what the differences are. The main difference is “where demand is price inelastic, total expenditure moves in the same direction as price. Where demand is elastic, total spending moves in the opposite direction to price. Finally, where demand is unitary elastic, total expenditure remains the same as price changes.” (Lieberman 102) Today we are going to talk about price elastic or inelastic in both the short run and long run of the following goods or services: a. Gasoline b. Texaco gasoline c. Salt d. Large screen TV e. Cosmetic surgery f. Laser eye surgery g. A product or service from your organization (performances) Following table will give the estimation of whether the product will be price elastic or inelastic in both the short run and long run: Product (Price Elastic) Short Run Long Run Gasoline Price inelastic Price elastic Texaco gasoline Price inelastic Price Inelastic Salt Price elastic Price elastic Large screen TV Price inelastic Price inelastic Cosmetic surgery Price elastic Price elastic Laser eye surgery Price elastic Price inelastic Performances Price inelastic Price inelastic The reason for having multiple combinations of price inelastic and price elastic are because of the demand of the products are different.