Contextualization

Introduction to Price Elasticity

Price elasticity is a fundamental concept in the field of economics that describes how the quantity demanded or supplied of a good or service changes in response to a change in price. It is calculated as the percentage change in quantity demanded or supplied divided by the percentage change in price.

Elasticity can vary across different products and services, and understanding this concept is crucial for businesses and policymakers. If a product has high price elasticity, it means that a small change in price will lead to a larger change in demand. In contrast, if a product has low price elasticity, it means that changes in price will have minimal impact on demand.

Real-World Applications and Importance of Price Elasticity

The concept of price elasticity has numerous real-world applications, from setting prices of goods and services to taxation policies and understanding consumer behavior. For businesses, understanding the price elasticity of their products can help them determine the best pricing strategy. For example, they can increase prices if their product has low price elasticity and decrease prices if it has high price elasticity to maximize their revenue.

Policymakers use price elasticity to determine the impact of taxes on goods and services. If a good has low price elasticity, imposing a tax on it will not significantly reduce its consumption. However, if a good has high price elasticity, a tax increase can lead to a sharp decrease in demand.

Suggested Resources

To delve deeper into the concept of price elasticity, you can use the following resources:

1. Khan Academy: Price Elasticity of Demand
2. Investopedia: Elasticity
3. Mankiw, N. G. (2014). Principles of Economics. Cengage Learning.
4. The Economist: Elasticity

These resources will provide you with a comprehensive understanding of price elasticity and its importance in the field of economics. Happy learning!

Practical Activity

Activity Title: "Investigating Price Elasticity: A Real-World Analysis"

Objective of the Project

The objective of this project is to investigate and analyze the price elasticity of a specific product or service in a real-world context. You will be applying the theoretical knowledge of price elasticity learned in class to a practical scenario, enabling you to understand and appreciate the real-world implications of this economic concept.

Detailed Description of the Project

In this project, your group will collaborate to choose a product or service that is of interest to you and conduct a thorough analysis of its price elasticity. The product or service can be anything from a can of soda to a Netflix subscription.

The project will be divided into three main parts:

1. Theoretical Research: You will begin by conducting a theoretical research on price elasticity of demand and supply. This will involve understanding the concept, its formula, its various types (elastic, inelastic, and unitary elastic), and how it is calculated. This research will help you in the next stage of the project.
2. Data Collection and Analysis: In this stage, you will collect real-world data on the price and quantity of the chosen product or service over a specific time period. You can collect this data from various sources such as price listings, surveys, or market reports. Using this data, you will calculate the price elasticity of the chosen product or service and analyze the results.
3. Report Writing: Finally, you will compile your findings and analysis into a detailed report. The report should be structured into four main sections: Introduction, Development, Conclusions, and Used Bibliography.

Necessary Materials

• Access to the internet for research and data collection.
• Spreadsheet software (such as Microsoft Excel or Google Sheets) for data analysis.
• Word processing software (such as Microsoft Word or Google Docs) for report writing.
• Calculator for price elasticity calculations.

Detailed Step-By-Step for Carrying Out the Activity

Part 1: Theoretical Research (Approximately 3 hours)

1. Start by reading the suggested resources provided above to gain a solid understanding of price elasticity.
2. Conduct additional research using reputable sources to deepen your understanding of the concept. Make sure to take notes or bookmark important information for future reference.

Part 2: Data Collection and Analysis (Approximately 5 hours)

1. Choose a product or service for your analysis.
2. Collect data on the price and quantity of your chosen product or service over a specific time period. Aim to collect data from multiple sources to ensure accuracy and reliability.
3. Using the price and quantity data, calculate the price elasticity of your chosen product or service using the formula provided in your research.
4. Analyze the results. What does the calculated price elasticity value tell you about the product or service?

Part 3: Report Writing (Approximately 4 hours)

1. Write an introduction that explains the purpose of your project, the chosen product or service, and the relevance of studying price elasticity in the context of your chosen product or service.
2. In the development section, detail the theoretical background of price elasticity, explain your data collection and analysis process, and present and discuss your results.
3. Conclude the report by summarizing your findings and drawing conclusions about the price elasticity of your chosen product or service.
4. In the bibliography, list all the sources you used for your research and data collection.

Project Deliverables and Written Document

At the end of the project, your group should submit a detailed written report and a presentation.

The report should contain:

1. An introduction that contextualizes the chosen product or service, its importance, and the objective of the project.
2. A development section that details the theory behind price elasticity, the methodology used in the project, and a thorough discussion of your findings.
3. A conclusion that summarizes the main points of your project, the learnings obtained, and the conclusions drawn about the price elasticity of your chosen product or service.
4. A bibliography that lists all the resources you used for your research.

The presentation should summarize your findings and can include visual aids such as charts or graphs to illustrate your data analysis.

The report and presentation should be submitted to the teacher within one week of the project's start.