 Hi, Professor George Friedman, Department of Economics, University of Massachusetts. Here to talk about why elasticity matters. And this has to do with public policy. Elasticity matters because depending on the level of elasticity, government policies setting prices, regulating output and production and prices can have counterintuitive effects. And we'll get to that. Government regulations and price setting can cause unemployment. Let's say you set a minimum wage. And let's say demand for the product, demand for labor is highly elastic, meaning big changes in demand for every change in price. And let's say supply is also highly elastic. So you get many more workers when you raise wages. So what happens if you raise wages? You get a big increase in demand, sorry, a big increase in the supply of labor. You get a big reduction in demand for labor in between lots of unemployment. You get a minimum wage. In that situation with highly elastic demand and supply, you get a big increase in unemployment. Bad thing. Let's say you have highly elastic demand for a product and highly elastic supply of the product, some types of housing or something, and you lower prices. You set maximum levels on prices. At lower prices, much more demand, much less supply, big shortages, bad thing. So in situations where you have highly elastic demand and supply, price controls can be a problem. You all have to find some way to allocate that shortage that you've created. On the other hand, let's say demand and supply are highly inelastic, as might be the case for labor, or gasoline, heating oil, bread, many other products, water. If demand is highly inelastic, very little change when prices change. Supply is highly inelastic, very little change when prices change. Then setting a higher price, a higher minimum wage, will create minimum unemployment. On the other hand, who will benefit? If you raise wages, those workers will get big benefits. Who will pay? Employers will be paying. So employers will be getting less advantage from hiring low wage workers for very little unemployment. The same if we regulate housing, which actually has very inelastic demand and supply. People need a place to live, takes a long time to build anything. Very inelastic demand and supply. People can regulate food prices, regulate heating oil prices, all these are situations with very inelastic demand and supply, and therefore government price regulation will have very minimal effect on unemployment or excess supplies or excess demand. So, does that mean we should regulate all prices? Probably not, but certainly the course of regulating the price of food of products in inelastic demand and supply may be very low. Well, the benefits may be significant. Thank you very much. Have a nice day.