Chapter 5 was another easy read for me, with a difficulty rating of 1. The chapter covers the topic of elasticity of both supply and demand. Elasticity is one of the most important concepts for microeconomics. It measures how much the quantity demanded or quantity supplied of a good changes in response to a change in price. Elasticity is generally a determinant of a good's necessity in a market. If a good is relatively inelastic, it must be a necessity since buyers are still willing to buy a higher quantity even if the price changes. With an inelastic curve, we see a steeper vertical curve because the price changes more than the quantity demanded or supplied of the good. On the other hand, when something is inelastic, it is not a necessity. If a good is relatively elastic, quantity responds more heavily to a change in price. So if the price of a good rises, the quantity supplied/demanded will react by not buying as much of the good. An elastic curve is more flat horizontally, since the quantity demanded will change more than the price of a good. With an elastic good, people will respond to a change in price by not buying the product, instead they will leave the market or buy a substitute for the good.
The concept of elasticity is very important for models in economics. The amount of elasticity can affect total revenue, the amount of tax received, and the size of a market. In order to develop economic models throughout the rest of the school year, we will need to apply our understanding of elasticity to supply and demand graphs.
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