By <enter your names here; e.g. Jeremy819>
Analysing some real data
Instructions
1.
2.
3.
4.
5.
Write your names on Slide 1 so that you are all responsible for finishing the tasks in
these slides.
You have 45 mins to complete this. Choose a person to be team time keeper!
Choose someone to share their screen, or all choose to work on the document at
the same time.
You have a short article to read, and 17 questions to answer.
Be a good team player! Do not run away and hide because you are too shy
Comparing gasoline and restaurant meals
Directions: Look at the following questions regarding the consumption of gasoline
and restaurant meals. Place a Y in the box if the answer is yes, place an N in the
box if the answer is no.
Gasoline
Restaurant meals
Q1. Does the good/ service
have a substitute?
N
Y
Q2. Is the good/ service very
necessary?
Y
N
Q3. Must a decision be made
right now?
Y
N
Q4. Which of the two items would be the most
price inelastic?
Q5. Which of your answers to Q1-3 influences
your answer to Q4?
Gasoline
All of them
Read-think-discuss: Price elasticity of demand
Directions: Read this short article published on the Mackinac Center for Public
Policy website [2 minutes reading time], then answer the questions below:
Q6. What is the price elasticity of short-run gasoline in
this article?
0.2, which is very inelastic. It is relatively inelastic in
the long-run too, but less so (0.7)
Q7. What is the price elasticity of restaurant meals?
2.3; Relatively elastic
Q8. Does this confirm what you have learned about
price elasticity?
Hopefully it does!
Q9. Which five products are the most inelastic?
Inelastic goods are salt, matches, toothpicks, short-run
airline travel, gasoline
Q10. Which five products are the most elastic?
Elastic goods are fresh tomatoes, Chevrolet
automobiles, foreign travel (long run), fresh green peas,
and airline travel (long run)
Read-think-discuss: Price elasticity of demand
Directions: These questions also relate to the article referred to in the previous slide:
Q11. Can you think of three reasons why demand for salt would
be more inelastic than fresh tomatoes?
Salt is inelastic because there are no good substitutes; it is a necessity to
most people, and it represents a small proportion of most people's
budget.
Q12. Why would the demand for toothpicks be inelastic? Are the
reasons the same as for salt?
Toothpicks are inelastic because they cost very little and represent a
small percentage of a typical grocery budget and have few substitutes.
Toothpicks are not a necessity.
Q13. Why might demand for gasoline in the short-run be more
inelastic than demand for gasoline in the long-run?
Short-run gasoline is more inelastic than long-run because in the short
run, we have to buy gas to keep our car going. In the long run, we can
switch to more fuel-efficient cars (including hybrid), ride the bus or
walk more. But in the short-run, those options are not available.
Q14. What does it mean if the elasticity coefficient for private
education is 1.1?
It the price of tuition increases by 10%, we would expect a 10%
decrease in the quantity demanded.
Q15. What are three factors that might explain why demand for
foreign travel is elastic?
Foreign travel is elastic because there are many substitutes, including
domestic travel; it is a luxury rather than a necessity; and it represents a
large proportion of most people’s budget.
Read-think-discuss: Price elasticity of demand
Directions: Last two questions:
Q16. What factors might explain why demand for
Chevrolet cars are very elastic?
Chevrolet cars would be very elastic because we don't
have to buy that brand of car – we have lots of
substitutes.
Q17. What are three obvious factors that determine
whether demand for demand for a good or service will
be inelastic?
Availability of substitutes; necessity vs. luxury; expense
or proportion of income