Price Elasticity of Supply & Demand by

meg_maki — 2018-11-25 03:40:55 UTC

Hi and Welcome!

meg_maki — 2018-11-25 04:02:28 UTC

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!

Elasticity of Demand / Elasticity of Supply Formulas

meg_maki — 2018-11-25 15:14:29 UTC

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.

The Price Elasticity of Common Household Products

meg_maki — 2018-11-25 17:17:28 UTC

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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Editorial Cartoon by Chip Bok

meg_maki — 2018-11-25 17:28:57 UTC

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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Determinants of Elasticity of Demand

meg_maki — 2018-11-25 17:39:23 UTC

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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Elastic or Inelastic?

meg_maki — 2018-11-25 18:00:07 UTC

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)

meg_maki — 2018-11-26 17:56:04 UTC

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.

Price of Cannabis in Canada

meg_maki — 2018-11-29 03:48:45 UTC

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.

Netflix Could Raise Its Price Another 37% Without Losing Subscribers

meg_maki — 2018-11-30 01:51:26 UTC

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.

No Vacancy?

meg_maki — 2018-12-01 01:35:06 UTC

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.

The Canadian Housing Bubble Explained

meg_maki — 2018-12-01 15:50:39 UTC

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.

Gas Price Drop

meg_maki — 2018-12-01 16:39:15 UTC

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.

Reflection Questions

meg_maki — 2018-12-01 17:47:34 UTC