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This spread will cover the topic "Price Elasticity of Supply & Demand" and its relevance to the field of Economics. My presentation will define what it means for a price to be "elastic" and "inelastic", identify the factors influencing price elasticity and will include some visual material about the topic and its importance to Canadians. I hope enjoy!

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Elasticity of Demand / Elasticity of Supply Formulas

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Elasticity of Demand / Elasticity of Supply Formulas

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The Price Elasticity of Demand (PED) measures the responsiveness of the demand of a product after a change in price.
The PED is considered elastic if a change in price results in a greater (very responsive) change in demand and is >1.
The PED is considered inelastic if a change in price results in a smaller (very unresponsive) change in demand and is <1.

The Price Elasticity of Supply (PES) measures the responsiveness of the quanity of a product supplied after a change in price.
The PES is considered elastic if a change in price results in a greater proportional (very responsive) change in supply and is >1.
The PES is considered inelastic if a change in price results in a smaller proprtional (very unresponsive)change in supply and is <1.

Perfectly elastic means the supply or demand is infitite at a specific price. This means that a change in price would eliminate all of the quanity supplied or demanded.
Perfectly inelastic means a change in price does not affect the quatinity supplied or demanded and is 0.

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The diagram below shows the 8 determinants or factors (in addition to price) affecting Elasticity of Demand. The factors I believe to be most influencial in accecting PED are 'income' and 'substitutes'. The more income a person or family makes, the less they will need to adjust their spending habits. They have the means to buy luxury items and are much more likely than lower income people to spend more for quality items. If they want a product, they are able to buy it without having to wait for a sale. This makes the demand less elastic as the cost of a product has less effect on the demand for this group of people. Substitutes are also an influenial factor. Most household products have a substitute product in case of the desired product's price being too high. Most stores offer a lower priced "no name" brand for a cheaper price. In the example of coffee, if the Folger's brand is too costly, the consumer might substitute it for the off brand product. In the event that coffee prices have risen all around, the consumer might substitute their usual caffeine fix for tea.
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The Price Elasticity of Common Household Products

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The Price Elasticity of Common Household Products

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Salt is considered to have an inelastic demand because there are not many substitutes, if any, for this item. Also, the price of salt is generally very low at any given time, and does not fluctuate much so consumers will buy it as they need it, regardless of the cost or other factors.
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Gasoline is probably the best example of a product with an inelastic demand. Our society is very dependent for use in our dailies lives. Consumers need gas in their cars and at the end of the day will pay the price regardless. Think of commercial or public transit. Durham Transit will not cease to offer their services for a day because it's too costly to fill the bus up with gasoline. Trucking companies will not postpone their deliveries in the event of gas price hikes. We do not have to plan flights around fuel costs.
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This meme speaks of a change (increase) in quantity of beer demanded. The image suggests the price elasticity of demand to be elastic because the subject of the image buys more beer when the price is lower. Is it though? We know that products with elastic demands are typically "luxury items", ones that are not necessary and have many substitutes available. Is there a substitute for your favourite beer? It depends who you ask. "The Most Interesting Man in the World" will likely say there is not substitute for Dos Equis beer, making the demand quite inelastic. The more specific, or "niche" the product, the more inelastic the demand, typically.
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Canadian Beef Demand Elasticity Study Summary (from cattle.ca)

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Canadian Beef Demand Elasticity Study Summary (from cattle.ca)

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Below is an article which discusses beef demand in Canada. Demand for meat (beef, pork and poultry) in Canada was found, by this study, to be inelastic at -0.24. Overall, the findings show a decrease in demand for beef since the year 1990. Two factors that could have influenced this decrease in demand, according to the article, include negative media attention and strong competition from other proteins. As the pressure of becoming more environmentally sustainable grows, our food choices are becoming more important than ever. Climate change is forcing us to reevaluate and scale back our demaging behaviours, and agriculture is a major contributor of CO2 emissions. Large amounts of grain must be harvested in order to raise the livestock to suitable size for slaughter, and according to the article, increasing grain prices can be reflected in retail beef prices. Increased prices of beef could encourage people to swap out bovine products for other meat products. The 2003 BSE event (more commonly known as "Mad Cow Disease") in Alberta actually created an increase in demand in beef for Canadians. This was attributed to Canadians "wanting to support the domestic beef industry" which I find suprising. Other countries such as Australia, USA and Japan, were no longer importing Canadian beef, and Canada, being the world's third largest beef exporter, had a surplus of beef. Canada began to import less beef to offset the overstock, so if one wanted beef during this time, they probably didn't have many other options. It's important to know that this study was funded by Agriculture and Agri-Food Canada.

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This article, taken from the Government of Canada website investigates the price and price elasticity of cannabis demand. This information is relevant to the topic and to us as Canadians due to the recent legalization of the drug in our country.  There is now data, acknowledged and presented by the government, regarding the cost of cannabis, when there was no such information available prior to the legalization. What is interesting and useful to know, is that this information was gathered prior to the legalization, and was submitted anonymously online by cannabis users. This self-reported data makes it impossible for the government to know how legalization will affect the market in the future. What the study has shown, is that retail cannabis prices have declined slightly over the past five years. The government has estimated the price elasticity of cannabis under prohibition to fall between -0.42 -0.60, giving it an inelastic demand. This predicts that a 10% drop in price could cause a 4 to 6 percent increase in the consumed amount of cannabis.

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Average price of cannabis in Canada is $6.60 per gram for illicit cannabis and $8.37 per gram for licit cannabis, as reported by users. A 10% drop in the price of cannabis could cause a 4 to 6 percent increase in the consumed amount of cannabis

Background

Whenever there is a change in policy, it is important to collect information on metrics that will be used by researchers and policy makers to examine the impact of the policy. Legalization of the recreational use of cannabis is a historic policy change for Canada. It is vitally important to create a regime of data collection pre- and post-legalization in order to determine what impact the regime change has had on society.

Despite representing one of the country's most commonly used illicit drugs, relatively little is known about the cannabis market in Canada. Recent surveys have reported that 12 percent of Canadians aged 12 years or older have used cannabis in the past year (CTADS, 2016), a rate that has been found to be higher among at-risk populations, including homeless youth and adults. Since the implementation of regularly administered national surveys on drug use, cannabis use prevalence rates ranged from a high of 14 percent in 2014 to a low of 9 percent in 2011, averaging 9.29 percent between 2004 and 2015. However, while surveys have begun to regularly track Canadians' past-year cannabis use, there is little empirical data on measures of the Canadian cannabis market, including prices, potency, and quantity consumed.

Knowing the price of cannabis is essential for assessing the consequences of current cannabis laws and making projections about policy changes. In the current cannabis regime in Canada, information on the retail price of cannabis is critical for measuring total cannabis expenditures, which can then be used to help estimate the amount of money being diverted to organized crime and other market participants. Data about the retail price in the illegal market can also be informative for governments or licensed producers for price setting for legal medical cannabis products. Many of the major outcomes discussed in cannabis legalization debates-the size of illicit market, tax revenues, and consumption (which will have implications for public health)-will be shaped by what happens to the retail price after the policy change. Finally, a lower price of licit cannabis may eventually make cannabis more attractive to children and youth, whereas higher price will likely cause flourishing of organized crime elements who will strive to supply cheaper illicit alternatives through the black market. The current report aims to fill this gap by providing estimates of: 1) cannabis prices from 2011 to 2015; and 2) the price elasticity of cannabis demand in Canada.

Method

The study used approximately 9,000 self-reported cannabis transactions from 2011 to 2015, extracted from the Price of Weed, an online crowdsourcing website that allows cannabis users to anonymously submit the price, size, quality, and location of their most recent cannabis transaction. Cannabis prices are examined across provinces, and according to the perceived quality, and quantity purchased, as well as in relation to medical cannabis prices. The transaction data is then used to generate price elasticity estimates of cannabis demand. Price elasticity of demand measures the degree to which changes in prices affect the consumption of goods or services. Specifically, price elasticity of demand measures the change in quantity demanded following a 1 percent change in price. Demand is considered elastic if an increase of 1 percent in price leads to a greater than 1 percent change in quantity demanded. Demand is considered inelastic if a 1 percent increase in price leads to a less than 1 percent change in quantity demanded. Estimates of price elasticity provide insight into how changes in price, either due to policy factors or internal market conditions, influence rates of cannabis usage.

Findings

Over the past five years, retail prices of cannabis have declined slightly. From 2011 to 2015, the average national price of high quality cannabis was $7.69 per gram, medium quality cannabis $7.14 per gram, and low quality cannabis $7.26 per gram. The average price of cannabis that includes all the reported qualities across all of Canada for the years under study was $6.60 per gram. Cannabis prices remained relatively stable across this period, with the median national price dropping on average $0.01 per month.

Medical cannabis prices tend to be higher than illicit cannabis prices. Comparisons of medical cannabis prices to illicit cannabis prices showed that medical prices were, on average, nearly $2.00 per gram higher than illicit prices. However, caution should be used when interpreting this price discrepancy. The comparisons are based on self-reported cannabis prices and do not control for the size of the transaction or the potency of the product.

Under prohibition, demand for cannabis appears to be inelastic, with price elasticity estimates ranging from ‑0.42 to -0.60. In economics terms, this means that the demand for illicit cannabis appears to be rather inelastic to prices because it is below a full 1 percent. In other words, the study estimated that a 10% drop in the price of cannabis could cause a 4 to 6 percent increase in the consumed amount of cannabis. These price elasticity estimates of Canadian users fall within the range reported in other western countries also under prohibition. The results highlight that demand varied according to the quality of cannabis, suggesting that changes to the supply and demand of cannabis may not be uniform across different potencies.

Implications

While this study is methodologically limited due to the self-reported, non-representative nature of the data, it exemplifies an important contribution to an understudied area of cannabis market in Canada. The estimates of prices and price elasticity in the current report represent those during a period of prohibition, making it impossible to fully estimate how potential movements to legalization could impact the market. However, the importance of obtaining estimates prior to policy shifts should not be understated. Having timely estimates allow policymakers to avoid many of the pitfalls in other jurisdictions. For instance, States within the US lacked baseline data on price estimates and elasticity during periods of prohibition, as well as information about the location and number of medical outlets. These barriers have precluded researchers and policymakers from fully analyzing the effects of legalization policy and the impact of legalizing cannabis on the market. Documenting this now in various provinces will play a significant role for evaluating the impact of legalization in Canada. An understanding of cannabis markets requires a meaningful starting point. Much of what is known about prices in Canada extends from a single source, self-reported transactions from the Price of Weed. Nationally representative surveys that ask about drug transactions in combination with more focused efforts to target regular, chronic users would strengthen the infrastructure currently in place for assessing the cannabis market.

Sources

Ouellet, M., Macdonald, M., Bouchard, M., Morselli, C., and Frank, R. (2017). The Price of Cannabis in Canada. Ottawa, ON: Public Safety Canada.

Canadian Tobacco, Alcohol and Drugs Survey (CTADS). (2016). Summary of results for 2015. Retrieved from http://healthycanadians.gc.ca/science-research-sciences-recherches/data-donnees/ctads-ectad/summary-sommaire-2015-eng.php

For more information on research at the Community Safety and Countering Crime Branch, Public Safety Canada, to get a copy of the full research report, or to be placed on our distribution list, please contact:
Research Division, Public Safety Canada
340 Laurier Avenue West
Ottawa, Ontario
K1A 0P8
PS.CSCCBResearch-RechercheSSCRC.SP@canada.ca

Research Summaries are produced for the Community Safety and Countering Crime Branch, Public Safety Canada. The summary herein reflects interpretations of the report authors' findings and do not necessarily reflect those of the Department of Public Safety Canada.

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Research Summary - Price of Cannabis in Canada

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Average price of cannabis in Canada is $6.60 per gram for illicit cannabis and $8.37 per gram for licit cannabis, as reported by users.

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Netflix Could Raise Its Price Another 37% Without Losing Subscribers

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Netflix Could Raise Its Price Another 37% Without Losing Subscribers

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This article discusses top streaming provider Netflix and how it could raise its price another 37% without losing viewers. This article is relevant to the topic because the fact that viewers are not very responsive at all to the change in price shows inelasticity of demand. of This information is useful to Canadians because 13.3 million Canadians are subscribed to this paid service. Netflix already raised its price by $1.00 in the past year while still receiving support from the 137 million subscribers world wide. Over 3000 people (Canadians and Americans) were surveyed and 39% of them said they would pay between $12-$15 for the service. The price could continue to rise without seeing a loss of customers because viewers believe the variety and volume of content, as well as the original content the service provides, is well worth the price. This is evident because Netflix is 100 million subscribers ahead of any of their competitors. Netflix can use this revenue to invest in more original content that appeals to its customers, which creates brand loyalty.

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Streaming provider Netflix has just upped its fees, moving from $7.99 to $8.99 per month for a basic subscription in Canada. The first such increase in two years, it's likely that most patrons won't begrudge the hike too much, considering it a worthwhile price to pay for home access to the company's cache of TV shows and movies.

But how high is too high? Will subscribers start to jump ship once Netflix pushes their customers over, say, the $15 limit? $20?

One survey conducted last year found Netflix may have a few fee hikes left before it bumps into the answer.

A survey of 3,114 people in the United States and here in Canada by TiVo's Digital found that 39 percent of current subscribers would be willing to pay between $12 and $15.

Another survey conducted by Atenga found that $14.99 was the price at which things changed for Netflix, competition-wise.

""You can see that they can increase prices all the way up to $14.99 with no material loss in subscribers," said Atenga CEO Per Sjofors, who offered some advice for the firm on elasticity. "So, Netflix should increase their price to $14.99 and use the added revenue to license more content and develop more of their own content. This is the only way they can sustain growth and increase shareholder value."

The potential problem for Netflix may be worse when looked at through a generational lens. Another survey of 6,567 college students found that barely a third had their own account. But that, of course, may be mitigated by the fact that most college students are far from the peak earning years of their parents, whose accounts they are presumably using.

First announced in August and then initiated last week, Netflix increased by one dollar both the basic and standard subscription rates to $8.99 and $9.99, respectively, while their premium plan - allowing for four simultaneous streams and featuring ultra high-definition 4K content - moves up $2 to $13.99 monthly.

Of course, the aforementioned surveys are conducted in U.S. dollars, where most subscribers have the Standard plan, which now costs $10.99 a month, up from $9.99 a month. That means Netflix could raise it subscription rates by another 37 per cent to $14.99 before it starts to lose out to would-be rivals.

So is this price jump a result of Netflix listening to the advice of Per Sjofors? It does sort of sound that way. Ostensibly, it's to aid in reaching the company's stated goal of producing more of its own content and relying less on movies and TV licensed from other networks and studios.

Netflix has already seen the benefits from catching entertainment lightning in a bottle with shows like Stranger Things, which is set to release its second season on October 27.

"Look, when we produce an amazing show like 'Stranger Things,' that's a lot of capital up front and then you get a payout over many years," Chief Executive Reed Hastings said to Marketwatch. "Seeing the positive returns on that for the business as a whole is what makes us comfortable that we should continue to invest and integrate to basically self-develop many more properties."

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Ted Sarandos, Netflix's chief content officer, said recently that the streaming service will likely have to increase its content budget to $7 billion in 2018, up from $6 billion for 2017 and $5 billion in 2016.

But the drive to produce more of its own shows may peter out at some point, says Rich Greenfield, a Netflix analyst for BTIG. "The question is how much content do you need to create, and at what point do you have enough?" says Greenfield to Business Insider.

Will there come a time when subscription costs outweigh the benefits for the average viewer? That's unlikely. Greenfield says that Netflix's customer base isn't going anywhere and that there's even room for more providers alongside Netflix.

"The average American is still watching four to five hours of TV a day," says Greenfield. "This won't be winner-take-all, there will be lots of winners."

"The key asset that Netflix has is size. It's 100 million subscribers ahead of all of its peers," said Greenfield. "This size gives it the ability to invest more heavily in content, which leads to more content that consumers want to watch, more watch time, and stickier subscriber. It's a virtuous circle that's really fuelling Netflix."

Netflix's price increase is also said to be well-timed to line up with Netflix's release next Monday of its third quarter earnings report, with expectations that revenue will reach $2.97 billion US, an almost 30 per cent bump from last year and seven per cent more than last quarter, based on strong subscriber growth.

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Netflix could raise its price by another 37% without losing subscribers, surveys say - Cantech Letter

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Streaming provider Netflix has just upped its fees, moving from $7.99 to $8.99 per month for a basic subscription in Canada. The first such increase in two years, it's likely that most patrons won't begrudge the hike too much, considering it a worthwhile price to pay for home access to the company's cache of TV ...

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This video discusses the soaring rates for downtown Ottawa hotels on Canada Day weekend, 2017, 300 days prior to the holiday. The video is relevant to the topic because supply and demand is one of the most fundamental concepts of Economics and is closely related to price elasticity of supply and demand. I've worked in a hotel for a few years now so I know both sides of the story and I've seen sky-high rates firsthand. Ottawa is a popular tourist destination anyway, being the capital of our country but on one of Canada's milestone birthdays, it's understandable that the demand for a room would surpass the supply at this particular time. When this video was filmed, downtown hotels in Ottawa were already selling out at rates between $500.00-900.00 a night, with a 4 month minimum to book. If you wanted to stay at the Fairmont Chateau Laurier, you'd be expected to shell out $4000.00 dollars, which may not even be refundable. That Chateau isn't just your average hotel though. Fairmont hotels are notoriously pricey, but also luxurious. The hotel is historic, beautiful and offers a step back in time. You're paying for the experience as well as the convenience of being steps away from Parliament, where the party is taking place. As someone who used to live in Ottawa, I know how busy the downtown core can get on Canaday Day. The streets are for pedestrian use only. Staying at a hotel across town might create more trouble than it's worth in terms of transportation. The downtown hotels can absolutely get away with charging such steep prices with minimal reprecussions. The demand is there while the supply simply is not.

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No Vacancy? Demand soaring for hotels on Canada's 150th

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This video discusses the Canadian Housing Bubble and is very interesting and informative to me, someone who hopes to buy a home in the future. The video discussesthe current, unsettling nature of the Canadian housing market and how we're currently seeing a housing "bubble", which is a substantial and sustained mispricing of an asset. Real estate prices in two of Canada's largets metropolitan areas, Toronto and Vancouver are steadily increasing and the population cannot keep up, digging themselves deeper and deeper into debt. There are many factors that contribute to this housing bubble, including one that I've never heard of prior to this video, which is the immigrant investor program. This program allows anyone with a networth of 1.6 million or more to enter Canada if they invest in Canadian bonds. This requires a payment of $800,000.00 into a government fund over 5 years that is used for infrastructure projects. The money is returned to them at 5 years. This creates an influx of wealthy immigrants, especially in cities like Toronto and Vancouver, and drives up real estate prices which makes it difficult for the domestic population to compete. Still, we need a place to live. Canadian banks offer low interest rates for mortages, but with the increasing prices of homes and condos, Canadians are applying for mortages they cannot afford, and they are getting approved. Toronto and Vancouver are among the top cities in the world at risk for a housing market crash.

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This video discusses the recent drop in gas prices in Canada.  Earlier this year in BC, gas prices were the highest they've been in about 10 years, but with changing seasons bring changing prices. This is relevant to the topic because gas prices are inelastic, meaning there is little response to the change in price, because the majortity of Canadians need gas and will buy it regardless of the price. However, as consumers, we are very happy to see the recent drop in gas prices, attributed to the change in "summer gas" to winter gas". Summer gas is more expensive and time consuming to produce since it must be able to tolerate warmer temperates during the summer months.

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From CTV News Channel: Dan Mcteague from GasBuddy.com says the change from summer to winter gasoline is behind the drop.