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Elasticity is a fundamental concept in economics, but it can be a bit tricky to grasp, especially for students new to the subject. However, with the help of simple analogies, we can unravel this concept and make it more accessible to everyone.
Generally speaking, elasticity is the relative tendency of one variable to change in response to another variable. In economics, we need to understand how quantities like supply and demand respond to changes in price, income and price of related goods.
There are two major types of elasticity in economics. Price elasticity of demand measures the responsiveness of a market’s demand to changes in price of a particular good or service. Price elasticity of supply measures the responsiveness of a market’s supply to changes in price of a good or service.
In this article, we will explore elasticity in economics using everyday examples that will help you understand how to teach this concept to your students so they can have a clear comprehension of this topic.
1) The Rubber Band Analogy
When teaching elasticity, start with the most straightforward analogy – the rubber band. Explain to your students that elasticity is like a rubber band’s ability to stretch and return to its original shape. Begin by showing them two rubber bands, one that is very stretchy and another that doesn’t stretch very much. Ask the students to stretch these rubber bands and remember how it feels.
Here’s how to connect this to economics:
- Elasticity is like the rubber band’s responsiveness to stretching. A product or service with elastic demand is like a stretchy rubber band. We call a rubber band “elastic” when it can be stretched all the way back and return to its original shape. In elastic demand, when the price changes, consumers quickly adjust their buying behavior, just as the rubber band stretches easily when pulled.
- Conversely, a product with inelastic demand is like a rubber band that doesn’t stretch much (maybe it’s worn out). We call rubber bands “inelastic” when they aren’t easily stretched. Inelastic demand means that consumers are not very responsive to price changes, meaning they will buy the good or service no matter how expensive it gets. This is similar to how the rubber band doesn’t stretch much when being pulled.
By using this analogy, students can visually and intuitively understand the concept of elasticity and how it relates to the responsiveness of demand to price changes.
2) The Movie Theater Analogy
Another way to understand elasticity is through the lens of going to the movies. Start by asking your students to imagine they are moviegoers with varying levels of fanaticism for a particular film franchise (like The Avengers). Then, present two scenarios:
- Scenario 1: They are huge fans of The Avengers and are incredibly excited about the latest movie release and are willing to pay a premium to see it on opening night. This illustrates inelastic demand because their desire to see the movie remains strong even with a higher ticket price.
- Scenario 2: They are interested in seeing the movie but are not particularly attached to the franchise so won’t mind seeing it at a later date. In this case, they might choose to wait for a lower-priced screening. This demonstrates elastic demand as their willingness to see the movie is sensitive to price.
In this analogy, students can relate elasticity to their own movie preferences, making the concept more relatable and memorable.
3) The T-Shirt Analogy
To teach elasticity from the perspective of supply, you can use the t-shirt production analogy. Imagine you’re a t-shirt vendor, and your students are your production team. Discuss two scenarios:
- Scenario 1: Your production team uses a series of machines to mass produce t-shirts and can quickly respond to changes in market t-shirt prices by adjusting the number of t-shirts they produce. As the price of t-shirts in the market increases, your team produces more to make more profit. This represents elastic supply because you can easily expand or reduce production based on market conditions.
- Scenario 2: Your production team creates handmade, limited-edition t-shirts that require significant time and effort. Even if the demand for t-shirts increases in the market, which increases their price, your team doesn’t have the machinery to increase production significantly. This represents inelastic supply because you cannot rapidly change production due to manufacturing constraints.
We hope these analogies will help you teach the concept of elasticity to your students! By using analogies in the classroom, we help students grasp difficult concepts a lot easier. What other analogies in economics do you like to use to help your students learn better? Share them in the comments below!