• Predict how the long-run and short-run impacts of elasticity affect equilibrium

• Explain how the elasticity of demand and supply determine the incidence of a tax on buyers and sellers

Studying elasticities is useful for a number of reasons, pricing being most important. Let’s explore how

elasticity relates to revenue and pricing, both in the long and short run. First, let’s look at the elasticities of

some common goods and services.

Table 5.2 shows a selection of demand elasticities for different goods and services drawn from a variety of

different studies by economists, listed in order of increasing elasticity.

Goods and Services

Elasticity of Price

Housing

0.12

Transatlantic air travel (economy class) 0.12

Rail transit (rush hour)

Electricity

Taxi cabs

Gasoline

Transatlantic air travel (first class)

Wine

0.15

0.20

0.22

0.35

0.40

0.55

TABLE 5.2 Some Selected Elasticities of Demand

Access for free at openstax.org
5.3 • Elasticity and Pricing 121
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