Price Elasticity of Demand

INTRODUCTION

Today we will study the concept of price elasticity of demand. We will also learn about how to determine whether a good is price elastic or inelastic by using the total revenue test. You should have read the text chapter identified below in the homework section and watched the related videos. We will start class today with you working cooperatively with a partner to find a solution to the "Problem of the Day" and then there will be a lecture on our next topic. This page contains all the information you need for today's class: homework, the problem of the day, helpful resources (videos, podcasts, etc.) and an explanation of the activities we will do in class. Use the table of contents on the right to help you navigate.

HOMEWORK

Read Mankiw (Chapter 5) and watch the following videos.

ASSESSMENTS AND ACTIVITIES

Problem of the Day: You will work cooperatively with your partner to construct a response to the following prompt.

  1. Define equilibrium and allocative efficiency.

  2. Use a different diagram to explain why each of the following government policies would cause allocative inefficiency in the market for lobsters:

    • A price floor on lobsters

    • A price ceiling on lobsters

    • A per unit subsidy to lobstermen

    • An excise tax on lobsters

Lecture

ENRICHMENT

Khan Academy