Elasticity: The best way to start the discussion of elasticity is with a general statement that an elasticity is simply a way to quantify the relationship between two (presumably related) variables.  This applies very broadly and students benefit from thinking about non-traditional elasticity calculations such as the exercise elasticity of weight (how weight responds to changes in the amount of exercise that a person does) or the study time elasticity of a course grade (how a student’s performance in a particular class responds to the amount of time they devote to studying).  These examples give students a concrete basis to consider more abstract concepts such as the price elasticity of demand.

 

Depending on the background of the class, it might also be useful to ask students to recall what they have already learned about elasticity in past coursework.  This provides a starting point for introducing possible new ideas such as the difference between an arc and point measure, how the slope of the demand curve is related to price elasticity, and so on.

 

When it comes to interpreting the various elasticity coefficients for price elasticity of demand, income elasticity of demand, cross-price elasticity of demand, etc., it is a good idea to point out that with price elasticity the important component is the magnitude of the coefficient and whether, in absolute value, this coefficient is greater or less than one.  For income and cross-price elasticity the most crucial dimension to the interpretation of the coefficient is the sign.  In these cases the sign indicates whether the good is normal or inferior (in the case of income elasticity) or whether two goods are substitutes or complements (in the case of cross-price elasticity).