- What real-world examples of the Law of Diminishing Returns do you have to share? Why this ‘law’ is also referred to as the “flowerpot law?”
- All demand curves have an elastic range, an inelastic range, and a point where elasticity = 1. As you move up the demand curve elasticity increases. The following graph, which is also attached, shows how elasticity changes as you move up and down the demand curve.
For example, take the price of gasoline, at current prices gasoline is relatively inelastic. But what would happen if the price of gasoline rose to $5, $6, or $7 a gallon?
At what price do you think the quantity demanded of gasoline would move into a range where its elasticity of demand would become elastic?
- What would happen to revenues if prices were lowered when demand was inelastic? Does anyone have any real-world examples? What would happen to revenues if prices were raised when demand was elastic? Does anyone have any real-world examples?
- What questions or comments do you have on the determinant of the price elasticity of demand referred to as substitutability? What are some goods/services that are substitutes for the goods/services produced by your workplace? How would the availability of substitutes affect the price elasticity of demand for a good or service?