buyer’s purchasing choices? (Credit: modification of “160906_FF_CreditCardAgreements” by kdiwavvou/Flickr,

Public Domain)

CHAPTER OBJECTIVES

In this chapter, you will learn about:

• Price Elasticity of Demand and Price Elasticity of Supply

• Polar Cases of Elasticity and Constant Elasticity

• Elasticity and Pricing

• Elasticity in Areas Other Than Price

Introduction to Elasticity

BRING IT HOME

That Will Be How Much?
Imagine going to your favorite coffee shop and having the waiter inform you the pricing has changed. Instead of $3

for a cup of coffee, you will now be charged $2 for coffee, $1 for creamer, and $1 for your choice of sweetener. If you

pay your usual $3 for a cup of coffee, you must choose between creamer and sweetener. If you want both, you now

face an extra charge of $1. Sound absurd? Well, that is similar to the situation Netflix customers found themselves
112 5 • Elasticity

in—they faced a 60% price hike to retain the same service in 2011.
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