Lesson 3: Lesson 3: Elasticity of Demand and Supply
Duration of Days: 3
Lesson Objective
Students will compute the price elasticity of demand using basic percentage changes to categorize goods as either elastic, inelastic, or unit elastic.
Students will critique corporate pricing strategies by utilizing the Total Revenue Test on real-world business case studies.
Why can some businesses raise prices significantly without losing customers, while others lose their entire audience over a small price increase?
How do availability of substitutes, luxury status, and time horizons change our shopping habits?
Elasticity, Inelastic,
Total Revenue Test,
Substitutes,
Complimentary goods
Necessities vs. Luxuries.
6.Eco.1.a. Explain how economic decisions affect the well-being of individuals, businesses, and societies within a region. 4.Eco.7.a. Explain how profits influence sellers in markets throughout regions of the United States.
Students practice comparing an academic text detailing consumer psychology with a mathematical matrix table showing changes in total revenue.
Students will investigate a series of consumer products, ranking them by perceived necessity. They will use the Total Revenue Test equation to determine how a business should price items like life-saving medicine versus designer fashion accessories without accidentally shrinking its total returns. Part of the assignment is researching substitute and complimentary goods, and graphing non-price factors that affect demand for a good or service
This lesson demonstrates that demand is not a rigid concept; consumer sensitivity to price dictates strategic choices made by companies and governments alike. DOK Level 3 (Strategic Thinking) because students must analyze consumer behavior profiles to optimize financial results.
Investigating why insulin or EpiPens remain highly purchased despite soaring out-of-pocket costs, contrasted against why streaming platform subscriptions (Netflix, Spotify) risk mass cancellations when monthly prices creep upward.
Students assume that a steep slope means an item is permanently inelastic everywhere, forgetting that elasticity can shift across different price ranges along the very same demand curve.
Provide a graphic organizer shaped like a capital letter "I" for Inelastic items (consumers buy them regardless of price because they are steep and rigid) to establish a lasting visual hook.
Case Study Writing: Students write a 250-word policy recommendation for a major public transit system explaining whether raising train ticket fares will successfully increase transit revenues, utilizing elasticity terms to justify their stance.