Core-004 Elasticity
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About Core-004 Elasticity
About the Teacher
Jay Moulton
Jay Moulton is a business veteran. In short:
- Corporate finance and turnaround expert in U.S. and Canada
- CEO or operator of numerous companies in many industries
- 30 years of actually applying business economics principles
- Successfully led and invested in several leveraged buyouts
- Director or advisor to 30+ different companies
- Experience in both for-profit and not-for-profit sectors
- Producer of 700 professional videos and several TV shows
- Author of six economics and business strategy books
- Graduate of Harvard Business School MBA program
- Graduate of The Royal Military College of Canada
- Professional electrical engineer
- Governor of the Harvard Club of British Columbia
Elasticity
MODULE 1
This module includes an introduction to elasticity and lessons that cover these topics: Price Elasticity of Demand, Income Elasticity of Demand, and Cross-Price Elasticity of Demand.
Price Elasticity of Demand
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In this lesson, we explore Price Elasticity of Demand.
Elasticities are measures of responsiveness - how a change in one variable affects another variable.
When a good has elastic demand, the quantity effect is greater than the price effect.
When a good has inelastic demand, the quantity effect is less than the price effect.
Unit elastic goods are ones where any change in price has an equal change in quantity, so changing the price has no effect on revenues.
Income Elasticity of Demand
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This video explores how demand responds to changes in income.
Most goods are normal goods. As income rises, the consumer purchases more normal goods.
For necessities, as income rises consumers purchase more necessities; however, the percentage increase of necessities purchased is less than the percentage increase of income, giving the necessity an income elasticity less than one.
For luxury goods, also known as superior goods, as income rises consumers purchase more luxury goods.
Typically, inferior goods are being purchased because the consumer does not have much money. As income rises, the consumer purchases fewer inferior goods. Inferior goods have negative income elasticity.
Consumer food products are used to explain what happens when prices remain the same and income rises. The video explores inferior, normal, and superior goods.
Cross-Price Elasticity of Demand
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Cross-price elasticity measures what happens to the demand for one good when the price of another good changes.
Cross-price elasticity is calculated by dividing the percentage change in demand for product x by the percentage change in price of product y.
Cross-price elasticity measures what happens to the demand for one good when the price of another good changes. If the price of coffee rises, the quantity demanded by a restaurant manager is less.
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