Elasticity Practice Problems

Elasticity is one of those economics terms that students can define on a quiz and still not really understand. They'll tell you it means "how much quantity demanded changes when price changes," and then freeze the moment you ask them to predict which of two real goods would actually behave that way. This set of elasticity practice problems is built to close that gap.

The first part is entirely predictive. Students look at four pairs of goods, imagine a 50% price increase on each, and have to circle which good in the pair would see a bigger drop in quantity demanded. The pairs are chosen so the reasoning actually has to do work: movie tickets against insulin, cars against salt, one soda brand against bottled water as a category, and a good with many substitutes against a good with none. None of these are trick questions. They're built around the three classic elasticity drivers, availability of substitutes, whether the good is a necessity, and how big a share of a budget it takes up, and students have to name which driver is doing the work in each case rather than just guessing which one "feels" more elastic.

The second part switches from prediction to data. Two businesses each raise a price 20%, and students are given the resulting drop in sales for each. From those two numbers alone, students have to determine which product is elastic and which is inelastic, and then reason through which price increase actually raised revenue, since a bigger percentage drop in quantity than the percentage increase in price is what erases the gain. That's the part of elasticity that trips up even confident students: elastic doesn't just mean "sensitive," it has a specific, calculable relationship to revenue.

The last part is built for disagreement. Students compare their Part 1 predictions in groups and, where they don't match, have to settle it by naming the specific rule that decides the case rather than by majority vote.

These practice problems work well right after a class has been introduced to the three elasticity drivers as separate concepts, because the pairs force students to apply all three in the same sitting instead of practicing them one at a time. A pair like automobiles against salt only makes sense once a student is weighing necessity and budget share together, not either one alone, which is exactly the kind of integrated reasoning a standalone vocabulary quiz can't test. It also gives you a natural formative check: a class that still splits down the middle on the salt-versus-automobiles pair after the rule has been named out loud is a class that needs another pass on necessity before moving further into supply and demand.

These elasticity practice problems come from Module 32: How Markets Work in Rapunzl's grades 6–12 curriculum.

Elastic or Not

You'll predict which of two goods is more elastic — more responsive to a price change — and defend your prediction using the substitutes, necessity, and budget-share rules, the same reasoning economists use.

Part 1 — Predict the more elastic good (individual)

For each pair, imagine the price rises 50%. Circle the good whose quantity demanded would drop more — the more elastic one — and explain why.

Part 2 — Use the data (individual)

A coffee shop raises its latte price 20%. Sales fall 30%. A pharmacy raises a life-saving medicine's price 20%. Sales fall 2%.

1. Which product's demand is elastic and which is inelastic? ______
2. Which price increase raised the seller's total revenue, and why? (Hint: compare the % drop in quantity to the % rise in price.) ______

Part 3 — Resolve disagreements (groups)

Compare your Part 1 answers. Where you disagree, settle it with the RULE, not a guess. Write the one rule that decides each disputed pair.

Teacher Notes

Part 1 works best when students have to say the rule out loud before they circle an answer, not after. If a group circles a good and then searches for a justification, they're pattern-matching instead of reasoning. Ask for the reason first: is there a substitute available, is the good a necessity, and how big a share of a typical budget does it take up? The circled answer should follow from that reasoning, not the other way around.

Part 2 is where the revenue connection either clicks or doesn't. Students who only compare the two percentage drops in sales, 30% against 2%, without also weighing the size of the price increase against each, will get the elastic-versus-inelastic call right but miss why revenue moved the way it did. Have them state both percentages side by side for each business before they answer the revenue question, so the comparison is explicit rather than something they eyeball.

Part 3 is designed to surface disagreement, not eliminate it before class. Resist the urge to settle disputes yourself. The value of this part is watching a group argue their way back to one of the three rules, substitutes, necessity, or budget share, and defend it with the pair in front of them rather than a rule they memorized in isolation.

This activity is one piece of the broader How Markets Work unit inside the Rapunzl teacher portal, where activities like this one sit alongside articles, guided practice, and a classroom investing simulator built for grades 6–12.

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