Using the e-World to Teach the Real World

The Latest Tools forInfusing Personal Finance and Economics into Your Classroom

Today You'll Discover How To:

1. Use technology to boost your teaching productivity

2. Build your knowledge base of (and comfort with) economic andpersonal finance concepts

3. Improve your core courses with economic and personal finance content

Troy White, Director of Sales and MarketingNational Council on Economic Educationtwhite@ncee.net212-730-1791 work917-270-0634 cell

Pathways to Success 2008Career & Technical Education Conference

Ramkota RiverCentrePierre, SD

Let's choose Elasticity of Demand...

"Overview" tab – a definition used to teach the concept of Elasticity of Demand

Price elasticity of demand is the way of measuring how much quantity demanded will change inresponse to a change in price. The formula for price elasticity of demand is the percentage change inquantity demanded divided by the percentage change in price. The advantage of measuringelasticities in terms of percentage change is that the specific units being used to measure thequantity and the price don't matter--only the percentages.

If the elasticity of demand is greater than 1, then a price increase of, say, 10 percent will cause adecrease in quantity demanded of more than 10 percent. This case is referred to as elastic demand.If the elasticity of demand is equal to 1, then a price increase of 10 percent will cause a decrease inquantity demanded of 10 percent. This case is referred to as unitary elasticity of demand. Finally, ifthe elasticity of demand is less than 1, then a rise in the price of 10 percent will result in a decreasein quantity demanded of less than 10 percent. This case is referred to as inelastic demand. In otherwords, elastic demand refers to a relatively large response of quantity demanded to changes in price,while inelastic demand refers to a relatively small response of quantity demanded to change in price.

Knowing the elasticity of demand is useful when determining the effects of price changes on quantitydemanded. A firm has more power over price changes if demand is inelastic.

Price elasticity of demand is always a negative number, since a higher price leads to lower quantitydemanded and vice versa. However, it is common practice to ignore the negative sign, so don't besurprised if you see it expressed as a positive number.

Glossary for Elasticity of Demand Lesson – populated from Elasticity of Demand "Overview"section

Price Elasticity of DemandThe responsiveness of the quantity demanded of a good or service to changes in its price. The priceelasticity of demand is the percentage change in quantity demanded divided by the percentage changein price.

Quantity DemandedThe amount of a good or service people will buy at a given price in a given period of time.

PriceThe amount of money that people pay when they buy a good or service; the amount they receivewhen they sell a good or service.

"Lessons" Tab – finding activity-based lessons to demonstrate Elasticity of Demand

A description of the lesson is included underneath the title...

After deciding the lessons under the "Lessons" tab weren't a good fit, we chose "view more highschool lessons >>". Now we have 4 additional lessons to choose from, for a total of 7.

We're going to use "The Mystery of the Crazy Quilt Airfares" lesson from the "The Great EconomicMysteries Book" (see pages 11-13 for the lesson)

We'll print the lesson, and we're ready for our in-class activity!

"Tips" Tab – helps us teach the concept

Tip #1Price elasticity of demand is the response of the quantity demanded to a change in price. Alarge response is called elastic demand while a small response is called inelastic demand. Youcan illustrate the different effects using two balls. Drop a baseball and see how much it bounces(inelastic demand). Then drop a tennis ball and see how much it bounces (elastic demand). Note that the baseball bounces but less than the tennis ball. Inelastic demand does not meanthere is no response; it means there is a small response. The percentage change in thequantity demanded is less than the percentage change in price.Tip #2Many students believe the myth of vertical demand. They think that for some goods a changein price will not influence the quantity demanded. They confuse no change with a percentagechange in the quantity demanded less than the percentage change in price. This leads to poorlogic. For example, "higher gasoline prices will not discourage gas consumption." Even in theshort run, higher gasoline prices will discourage gas consumption even if the percentagedecrease in the quantity demanded is less than the percentage increase in price. In the longrun, consumers can find creative substitutes for gas such as more fuel-efficient cars or livingcloser to work, and the percentage decrease in the quantity demanded will be even greater.Tip #3Even necessities with inelastic demand curves become more elastic if there are many firmscompeting to sell them. One firms product becomes a substitute for another firms product. Competition increases elasticity of demand.Tip #4A quick activity is to make statements describing the characteristics of products, have thestudents determine if the product has an elastic or inelastic demand and explain why. Someproducts might be salt, insulin, steak, autos and yachts.

"Multimedia Demonstration" – video clip introduces/reinforces the concept (for you and yourstudents)

Let's find an online lesson to extend our Elasticity of Demand lesson...

Using the e-World to Teach the Real World

The Latest Tools forInfusing Personal Finance and Economics into Your Classroom

Today You Discovered How To:

1. Use technology to boost your teaching productivity

2. Build your knowledge base of (and comfort with) economic andpersonal finance concepts

3. Improve your core courses with economic and personal finance content

Resources Included:

Virtual Economics -- http://ve.ncee.net

Thinking Economics -- http://www.thinkingeconomics.com

EconEdLink -- http://www.econedlink.org

Troy White, Director of Sales and MarketingNational Council on Economic Educationtwhite@ncee.net212-730-1791 work917-270-0634 cell

Pathways to Success 2008Career & Technical Education Conference

Ramkota RiverCentrePierre, SD