You just opened a flower shop and are trying to understand pricing issues. You were told that elasticities are very important in determining prices and what products to supply, so you decide to investigate this concept.
You call your friend, an economics professor, and ask, "What is the price elasticity of demand? What determines it? What is elastic and inelastic demand?"
To really understand it, compute the following price elasticities of demand:
Of the above examples, which is more elastic, and which is the least elastic? Why? Answer the following questions:
Now that you are an expert on elasticities, what do you think would be the best time of year to raise prices of flowers, and why?
What do you think the elasticities are in the flower business?
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