Applications of Elasticity

Once students have understood the theory of the different elasticities, an important progression is being able to apply it to different markets. One exercise that I use with my iGCSE and AS groups is as follows:

1. I collate some images of different products (e.g. chocolate bar) or scenario’s (e.g. empty restaurant).
2. I then print out one set of images; each set on different coloured paper.
3. I give each group of students one set of images.
4. Within their groups they need to decide under what heading each product/scenario fits. The headings being: Elastic PED, Inelastic PED, Elastic PES, Inelastic PES, Normal good, Inferior good.
5. They come up to the board and blue tack the images under the appropriate heading.
6. I then ask each group why they have put a specific product or scenario under each heading.

The good thing about this exercise is that:

• You can differentiate what product you ask each person to explain (PES is often more difficult than normal good).

• Everyone is involved as they have to agree between them how to allocate the images.

• There is NO ONE CORRECT ANSWER, so students may have the same product under different headings; but as long as they justify correctly why they have done so, using the determinants of PES, PED and YED, then that’s fine.

• As a result this also helps them develop good evaluation skills. For example:

“Johnny in the blue team, why did you put chocolate under inelastic PED?”

“Because some people are addicted to it and it only takes up a small percentage of consumer’s income.”

Another student says…”but sir, doesn’t chocolate have lots of substitutes making it elastic PED.”

Another says…”doesn’t it depend on what type of chocolate it is? Expensive chocolate would make it elastic PED as it’s more of a luxury.”

All responses are technically correct, so this emphasises the point that it depends upon what type of chocolate you are talking about and in what context, thus evaluating.

Give it a go…