Contextualization

Welcome to your group project on Price Elasticity! Price elasticity is a fundamental concept in Economics that drives many decisions made by businesses across the globe.

Elasticity, an economic concept developed by Alfred Marshall in his book "Principles of Economics," is a measure of a variable's sensitivity to a change in another variable. In our specific case, price elasticity measures how much the quantity demanded or supplied of a product or service changes in response to a change in price.

The price elasticity of demand quantifies how much the quantity of an item consumers are willing and able to buy decreases as the price increases, or vice versa. For instance, if a candy bar costs $2 and the price goes up to $3, people might start buying less of them. Conversely, if the price goes down to $1, people might start buying more.

If a product has an elastic demand, it means that a small change in price will result in a large change in quantity demanded. On the other hand, an inelastic demand means that a change in price will result in a small change in quantity demanded. Knowing the elasticity of their products helps businesses and marketers make optimal pricing decisions.

In the real world, price elasticity impacts many aspects of daily life and business, influencing everything from the price of gas to the cost of your favorite chocolate bar. It is a critical factor in determining prices and understanding market dynamics.

For example, let's take a look at the gasoline market. Many would predict that the demand for gasoline is inelastic because people need to use their cars, no matter the cost of fuel. However, when prices get too high, people might start taking public transportation or carpooling, revealing that the demand for gasoline is more elastic than it might seem at first glance. Therefore, understanding price elasticity is an important skill for anyone interested in economics and business.

References

To facilitate your understanding of the topic, here are some resources we recommend:

1. Khan Academy - Price elasticity of demand
2. Investopedia - Price Elasticity of Demand
3. Corporate Finance Institute - Price Elasticity of Demand
4. EconomicsHelp - Elasticity
5. YouTube - Introduction to Price Elasticity

Use these resources to familiarize yourself with the concept and to inspire the practical part of your project.

Practical Activity

Activity Title: Exploring Elasticity in the Real World

Objective of The Project:

To understand and apply the concepts of price elasticity of demand and supply in real-world contexts.

Detailed Description of The Project:

In this project, you will act as an economist for a day, using creativity, teamwork, and acquired knowledge on price elasticity. Your task is to select a product or service in your local market and conduct an analysis of its price elasticity. Each group will create a mini-report on their specific product or service, explaining its price elasticity and demonstrating an understanding of the factors that influence it.

The practical part of your project will culminate in a presentation where each group will share their findings, applied theory, and the methodology they used during their investigation. Moreover, it will provide an opportunity for each group to discuss the broader implications of price elasticity for consumers, producers, and policymakers.

Necessary Materials:

• Pen and paper for noting down observations.
• Internet access for researching the chosen product or service.
• Access to data on your chosen market, this might involve conducting surveys, online research, or visiting local stores.
• Presentation software (such as PowerPoint, Google Slides, etc.) to create a final presentation.

Detailed Step-by-Step for Carrying Out the Activity:

1. Formation of Groups and Topic Selection: Form groups of 3-5 students. Each group needs to select a specific product or service available in your local market for this project.

2. Market Research and Data Collection: Carry out in-depth market research about your chosen product or service. Try to collect data on its prices and how much people consume it at different price levels.

3. Analysis: Use the collected data to calculate the price elasticity of demand for your chosen product or service. Consider whether the demand for your product is elastic, inelastic, or unit elastic.

4. Discussion: Discuss the factors influencing the price elasticity of your selected product or service. This can include factors like the presence of substitutes, the percentage of income spent on the product, whether the good is a necessity or a luxury, and so on.

5. Report Writing: Write a report detailing your findings. This report should contain an introduction to the selected product or service, why you chose it, a detailed account of the data you collected, your calculations, and a discussion of what these results mean in terms of price elasticity.

6. Presentation Creation: Create a slide presentation detailing all the steps above. Make sure you include all your findings and your understanding of the price elasticity of demand for your chosen product or service.

7. Group Presentation: Each group will present their findings to the class, explaining their methodology, findings, and conclusions.

Deliverables:

By the end of the project, each group will provide two primary deliverables:

1. A report in Word or PDF format discussing the entire process from the selection of the product or service, data collection, calculation of elasticity, findings, and implications. This should be well-structured with the following sections: Introduction, Development, Conclusions, and Used Bibliography.

2. A presentation showcasing their findings, methodology, and conclusions. The presentation should also contain an interpretation of the results, and what they imply about the selected product's elasticity of demand.

Remember, the project's main goal is not just about understanding price elasticity, but also honing your skills in research, analysis, collaboration, and presentation. Enjoy delving into economics in practice! Good luck!