Elasticity
(requires Flash)
RRR Awards
- Winner of two Parents' Choice Awards and 5 stars from Common Sense Media
Albums and Collections Containing This Song
Lyrics
Verse I
Percent change in demand over percent change in price
If you sell it for less, you'll sell more merchandise
But how much more?
We can get it precise using elasticity (elasticity)
Let's look at what drives elasticity up
People are more sensitive when they've got a substitute
Or it's a big part of their expenses
Or when they've got more time to adjust to circumstances
Like if you raise the price of gas, your consumers will care
They'd rather take the bus or walk from here to there
They might not do it right away but over time they will
And even faster if gas is most of their credit card bill
Using this concept you can optimize
Manipulating price could be wise
But a competitive market means you might be stuck
'Cause when prices are fixed, you're out of luck
Chorus
It's not a mystery, just call it elasticity
It's not a mystery, just call it, call it
Call it elasticity (elasticity)
Call it elasticity (elasticity)
Call it elasticity
Verse II
If |e| is > 1
Then demand is elastic, you'll see people respond
But raise your price, and your revenue drops
'Cause demand falls faster and you suffer a loss
But if your revenue grows when your price goes up
It means demand went down but not too much
(Heads up! This is different from perfect inelasticity
Where e = 0 and there's no sensitivity
Whatever you charge, demand will stay the same
Price inelasticity's a different game)
Where |e| < 1, demand is price inelastic
And this remains true as long as change is not drastic
But if |e| = 1, no less no more
Demand is unit-price elastic, different from before
If you think of a demand curve, then you're right in the middle
And your revenue won't change if you alter price a little
Chorus
Description
This rap song teaches about economic elasticity of demand. "Elasticity" explains the equation for demand elasiticity, and substitutes using consumer examples. The second verse covers different types of elasticity depending on the absolute value of e, including demand elastic, demand inelastic, and unit-price elastic.
This economics song is suitable for supplementary teaching of demand elasticity to high school, college, and graduate school students.
Related Songs
Song Notes
- Features contributions from the following artists: ben jackson, heather ogilvy, mac soto, matt omalley
State Standards
State standards listed here are representative of school standards across the United States.
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