APPLIED ECON ACTIVITY 1 (4TH QTR) - ELASTICITY

Part I. Direction: Observe the market in your community or think about the goods and services
offered in your area. Give examples of goods that are considered to be elastic and inelastic.

ELASTIC GOODS INELASTIC GOODS

Softdrinks Life-saving Medication

Coffee Electricity

Gadgets Post-secondary Education

Cars Gas

Luxury Items Cigarettes

Part II. Explain why you think those goods are elastic and inelastic. (Minimum of 5 sentences)

The goods that I chose in the elastic good are goods that are not considered necessities, or goods
for which there are substitutes readily available. Soft drinks are not a necessity for everyone as there
are a lot of beverages you can substitute. Since all of these goods in elastic goods have a lot of
substitutes, a change in prices would have a big impact on the demand. On the other hand, inelastic
goods have a smaller percentage change in quantity demanded/supplied. It implies that it’s less
sensitive than elastic goods. The goods I put in the inelastic goods are goods that are considered
necessary or without many (or any) substitutes such as gas, medication, electricity, etc.

Refer to the graph below and identify what is being pointed in each letter. Briefly explain the
concept of each line or point . Write your explanation
Answers:

(A) Supply Curve

This is a graphic representation of the relationship between product price and quantity of product that a
seller is willing and able to supply.

(B) Demand Curve

This is a graph depicting the relationship between the price of a certain commodity and the quantity of
that commodity that is demanded at that price.

C) Surplus
This is the extra benefit that both consumers and suppliers get in the transaction

D) Shortage

A shortage occurs when a producer prices the products too low and the quantity demanded exceeds the
quantity supplied.

E) Equilibrium

This is the point where the supply curve and the demand curve intersect.