Elasticity and in-elasticity
Which of the products are relatively elastic, and which are relativity inelastic and why?
Read the following examples. Which of the products are relatively elastic, and which are relativity inelastic and why?
Pair of jeans
Elasticity versus Inelasticity
The elasticity versus inelasticity of demand refers to the percentage to which demand responds to the changes in other economic factors such as price, income, or even other substitutes available. Hence, elasticity is a measure of how demand will shift when these factors change. While, inelasticity occurs when demand fluctuates in manner that is unrelated to these economic factors.
The elastic goods are the refrigerator, internet service, pair of jeans, scarves, orange juice, computers, and concert tickets. These products are elastic since the demand does respond to the changes in the economic factors such as price, income, and even the presence of substitutes (de Rassenfosse, 2020). For instance, when the price of a pair of jeans is increased, many people will avoid the product. On the contrary, a low price will attract more customers. Also, some of these products are replaceable, such as concert tickets. These can be substituted by watching the concert live or its recording, rather than paying an excessively high amount for the same.
The inelastic goods include gasoline, diamond, and salt. Gasoline is something which many cannot do without. Therefore, even though the price is increased, the same number of customers will still purchase the product (Payne et al., 2020). There is no way that people will manage to move around in their vehicles without the commodity. Diamond is also inelastic due to the industry in which it exists. It is a unique good which has no substitute. Also, salt has no substitute since there is no other product which can offer such a flavour in meals. It is considered a necessity, and it is affordable to many people.
Elasticity and inelasticity are mainly a measure of demand changes based on economic factors. If change is not due to economic factors, the good is elastic. However, if the change is not caused by economic factors, the good is said to be inelastic.
de Rassenfosse, G. (2020). On the price elasticity of demand for trademarks. Industry and Innovation, 27:1-2, 11-24. https://doi.org/10.1080/13662716.2019.1591939
Payne, J., Manning, M., Fleming, C., & Pham, H.-T. (2020). The price elasticity of demand for illicit drugs: A systematic review. Trends and Issues in Crime and Criminal Justice, (606), 1–19. https://search.informit.org/doi/10.3316/informit.448197509271195