The Behavioral Economics in Marketing’s Podcast Elasticity | Definition Minute | Behavioral Economics in Marketing Podcast
Jan 13, 2023
A rapid definition of elasticity and how it measures responsiveness between economic variables. A clear gasoline price example shows quantity demanded shifts. Short takes on why elasticity matters for taxation, firm behavior, wealth distribution, and welfare concepts like consumer and producer surplus.
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Elasticity Measures Responsiveness
- Elasticity measures how responsive one economic variable is to changes in another, commonly quantity demanded to price changes.
- Sandra Thomas-Caminol uses gas price examples to show demand can change nonlinearly as price shifts.
Gas Price Example Shows Demand Change
- Sandra Thomas-Caminol illustrates elasticity with a gas example where spending and quantity change as price rises from $1 to $2 per gallon.
- She then notes a steeper price increase leads to much lower purchased quantity, showing practical variation.
Three Key Elasticity Types
- There are three main elasticity types: price, cross-price, and income elasticity of demand.
- Understanding elasticity helps explain taxation incidence, firm behavior, and welfare measures like consumer surplus.