Hello Ms. Teetaert and fellow classmates.
Throughout last week we discussed elasticity and the effect it has upon demand and price.
In the simplest of terms elasticity is the measurement of how responsive a variable is to a change in another variable. For example:
- "If I lower the price of my product, how much more will I sell?"
- "If I raise the price of one good, how will that affect sales of this other good?"
When a company wants to increase it's revenue they look towards the elastic demand or inelastic demand of their products. If they were to increase the price of their products, consumers may or may not be willing to still purchase them. To understand price elasticity of demand one must know the difference between elastic demand and inelastic demand. Elastic demand is a type of demand that will rise or fall depending on the price of the good. For example, candy bars are an elastic demand. If the price of that candy is around one dollar, most people will buy the candy and it will be high in demand. However, if that same candy bar's price rose up to four dollars, most people would not buy the candy.
Inelastic demand is the opposite. People will buy goods with an inelastic demand no matter what the price is. A good example of this would be gas. People complain and complain about gas prices, yet they still buy it because they need it, even if it is three dollars a gallon. Another example would be life-saving medications. Even if they are expensive, people will still buy them to maintain their health. 
The following are product characteristics that help to determine price elasticity of demand:
1. Luxury or necessity
2. The number of close substitutes
3. Percent of budget spent on the product
