PANIC WAS THE ONLY WORD TO describe the situation in the fall of 2009 when Canadians across the country attempted to get the H1N1 (swine) flu vaccination. Scenes of extremely long lineups and other frustrations were common from coast to coast. In some cities, such as Calgary and Toronto, lineups of people outside flu shot clinics would start to form at 3 or 4 A.M. What in the world was happening?

The long lines were partly caused by a supply shortage of the H1N1 flu vaccine as the manufacturer, GlaxoSmithKline Inc., experienced difficulties growing the vaccine, a bottleneck filling vials quickly, and delays obtaining government approval for the version of the vaccine intended for the general population. Health Canada ordered 50.4 million doses, but GlaxoSmithKline could only supply about 440 000 doses to the federal government by early November as the company tried to meet international demand.

The H1N1 vaccine delays and shortage were worsened by the significant demand for H1N1 flu shots by Canadians. In the summer of 2009 the World Health Organization declared the outbreak to be a pandemic (a worldwide epidemic). So for many months, the Canadian public was repeatedly warned by health officials that the H1N1 flu would soon arrive and that all Canadians should get a flu shot—creating significant demand. In October, Canadian demand spiked when two relatively healthy children in Ontario were killed by the virus. Many Canadians, even those who were not considered to be high risk, scrambled to get a shot.

A big controversy during the 2009 H1N1 flu pandemic was that some private for-profit health clinics in Toronto and Vancouver, which charge thousands of dollars in membership fees and/or for checkups, had received vaccines from the government and that their patients could jump the line for the shot. This news sparked another round of debate about the perils of two-tier health care in the country. Although most people either refused to or couldn’t go to these clinics, some Canadians were willing to pay more to get the shot.

Clearly, the demand for flu vaccine is unusual in this respect because getting vaccinated could mean the difference between life and death: in 2009, 428 Canadians died as a result of the H1N1 flu pandemic. Let’s consider a very different and less urgent scenario. Suppose, for example, that the supply of a particular type of breakfast cereal was halved due to manufacturing problems. It would be extremely unlikely, if not impossible, to find a consumer willing to pay 10 times the original price for a box of this particular cereal. In other words, consumers of breakfast cereal are much more responsive to price changes than consumers of flu vaccine.

But how do we define responsiveness? Economists measure responsiveness of consumers to price changes with a particular number, called the price elasticity of demand. In this chapter we will show how the price elasticity of demand is calculated and why it is the best measure of how the quantity demanded responds to changes in price. We will then see that the price elasticity of demand is only one of a family of related concepts, including the income elasticity of demand, cross-price elasticity of demand, and price elasticity of supply.