Elastic in economics is to describe a change in the behaviour of buyers and sellers in
response to a change in price for a good or service. If prices for items are too high, it will
cause supply to be greater than the demand the producers will be unable to move the
products causing them to be stuck with unsellable goods. If the price goes down the
demand will increase leaving less supply. I am a bargain shopper. I love a good discount, so
I wait for prices to go down and I purchase things I want then. I do not purchase goods if I
feel they are overpriced. If it is not a life-or-death item. I can do without it. Elasticity in
Economics refers to the reactivity of supply and demand to price or one of its determinants.
What this means is, if there is a change in price, there can and will be a change in demand.
For example, if Apple were to increase the price of an iphone (Which they usually do)
would the demand change? Well in this case, usually people will still pay for the iphone if
they are fans, but there or folks like me who will then search for a cheaper phone as an
alternative and therefore the demand in general will go down. This leaves some unsold
merchandise, and therefore the supply is higher than demand. An inelastic good, different
from something popular like the iphone, would be something like my prescription drugs i
need for my family. The price is what it is, and the demand and supply stay the same, as it's
a medication required to live and function. To put simply, an inelastic good is rigid and non
changing, while and elastic good is able to change demand and supply based on the price.
The concept of elasticity can be defined as the flexibility of change in the price for the
buyers and sellers. A higher and a lower price affect consumers and producers a lot. If the
producers increase the price of their items, then the demand would go down and the
consumers would find a cheaper alternative, which leaves the supply too high. If the
producers decrease the price of their items, then the demand would be higher, but the
supply would be lower, as the producers would not be making as many profits.
An elastic good I have is buying Victoria’s Secret clothing. I like the quality of their
clothes, but I refuse to pay full price. I buy most things that are on sale, because I cannot
justify paying $80 for a pair of leggings. An inelastic good that I buy would be gas. I
cannot substitute gas for something else, (well besides getting an electric car) so I have to
spend the money on the gas. No matter how much the gas prices increase, I have to get it
regardless.
The term or concept of elasticity is the flexibility that the product or service has to changes
in price for the consumer. A consumer will have certain needs that can be met by necessary
(or inelastic) products for their household. If an item is important enough for everyday life
such as food staples, clothing, gas or electric for utilities than the consumer will more than
likely pay to have it available. An inelastic good is something that even though the
consumer may want it they may be able to survive without it and would be considered more
luxury goods. Some examples of inelastic goods are vacations, theater tickets, designer
label clothes, and jewelry. They are nice to have but if the budget does not allow then it can
be removed to fulfill the basic human needs for food, shelter and clothing. An item that
comes to mind for my family are trips to the city. We live about 20 miles from San Antonio
and before gas prices went up, I would take a drive just to pick up something for dinner or
fulfill a craving for Starbucks. Since gas prices are so high, I have cut down to one trip a
week to the city as opposed to my 3 trips weekly. Elasticity is a economic term which
describes the change in behavior of buyers and sellers in response to a price change for a
good or service. When the price of goods or products goes up consumers demand less of it
and then more supply enters into the market. If the price goes up too high the supply will
become greater than demand and producers will be stuck with the excess. Low prices are
signs for producers to produce less and for buyers to buy more. A product is considered to
be inelastic if the quantity demand of the product changes very little when the price
fluctuates. Price elasticity of demand can affect a business's ability to increase the price of a
product. If the price for an inelastic good is lowered then the demand for that good does not
increase resulting in less overall revenue due to the lower price. Elastic goods include
luxury items and the inelastic products are usually utilities, prescription drugs, and Tabaco.
Another word of inelastic is stable and rigid to name a few. I define the concept of
elasticity as a price increase or decrease and how the change in price effects the amount
that is purchased by consumers and how a change in price then impacts how much of
something is supplied to consumers.
A higher price tends to lower the quantity that is purchased by consumers while producers
of a good or service ramp up production. A lower price of a good or service is appealing to
consumers and the lower price typically sells more units causing the producers of a good to
lower production.A luxury, or elastic good, I consume is soda. I do not need it but when it
is not on sale (costs more) I substitute a brand I like for brand I like less that costs less than
a brand I enjoy. For example, the sale price for 3 cases of soda I do not enjoy as much is
$9. The soda I enjoy is not on sale and costs $6.49 for one case. I want soda and will
purchase it, but I am willing to purchase a brand I enjoy less because the cost is
less.Something that falls into the inelastic category, a necessity, is gasoline. Despite the
constant fluctuating prices of gasoline, I still need to purchase gasoline to go to work and
appointments. I am smarter about my driving when it comes to determining what I must do
and what I want to do. Elasticity is a term that measures the percentage change of one
variable in response to the percentage change of another variable. Prices affect both the
consumer and producer when they go up high and when they drop low. Whenever prices
drop low, the consumer demands more of the good, which can bring in more income for the
producer, but it could also cause a shortage. On the other hand, if a price goes up high, the
consumer will not demand as much of the good, therefore the producer will have more on
their hands than they need causing the producer to be stuck with the excess amount. An
example from my personal life is a fairly simple explanation. I really enjoy steak.
Whenever the price of steak was lower in a grocery store, I would buy more of it for our
family to eat. Whenever the price shot up at our local grocery store, we opted for another
meal because the price was a crazy amount to pay just for steak. When the price went back
down, we decided to go back to buying more of it. there are two ways to look at elasticity
of demand. It can be viewed from the aspect of the slope of the demand curve. The closer it
is to the horizontal, the more elastic is the demand. The more the curve is toward the
vertical the more inelastic the demand. If it is completely horizontal the demand is perfectly
elastic. If it is completely vertical, it is perfectly inelastic. It can also be viewed from points
along the demand curve. As we move down a straight-line demand curve, demand moves
from elastic to inelastic. Elasticity gives us a way to measure how much people respond to
price changes. The price elasticity of demand is the percentage change in quantity
demanded of a good divided by the percentage change in the price of that good. Although
the quantity demanded changes in the opposite direction from the change in price, we
usually talk about the price elasticity of demand as a positive number.
The possible values of the price elasticity of demand are divided into ranges:
We say that demand is elastic if the price elasticity of demand is more than one.
We say that demand is inelastic if the price elasticity of demand is less than one.
We say that demand is unit elastic if the price elasticity of demand is equal to one.
If a good or service is inelastic, consumers are less sensitive to a change in price. A
perfectly inelastic good is a good that has no change in price or quantity demand .If
something were to be perfectly inelastic, consumers would have the comfort of knowing
that this one item will never change in price and always be available. Something being
perfectly inelastic as a buyer and seller would provide a company’s employees job stability
and a reliable income. Something being perfectly inelastic would be great for a business
because there wouldn’t be predictability, there would be certainty. There would be no
planning, no real need for budgeting or reactive actions for a supply being short on quantity
or fluctuation of price.The only example I can come up with that is close to being perfectly
inelastic is the price of a hot dog and fountain soda at Costco. This combo has been $1.50
since the 80’s and they do not plan to raise the price, despite current inflation .I love Coke
Zero but due to the higher prices close to $8 in my area for a case of 12, I have been
substituting for the store branded Coca Cola Zero. It still satisfies me, and I have learned to
like it. When all of the shortages were happening a couple of years ago, we also switched
other national brands for food items to store branded items and we have still kept them on
our shelves since ultimately it is saving us money. Unfortunately, the price of gas is as you
stated constantly changing and still necessary. We can only make better choices deciding
where and how much we use our vehicles to help counter the rising prices of gasoline,
which is an inelastic product.In my opinion, the term elasticity pretty much describes itself
for the most part. I feel like the term somewhat tells the definition for itself. We see
elasticity daily, but sometimes, myself included, we overlook it not really paying attention
unless the prices get extremely high, or extremely low. Prices on items in today's economy
seem to fluctuate daily. Like gas prices for instance. They gave be sky high one day, then
lower the next. Elasticity is defined as the percentage change in quantity divided by the
percentage change in price. Essentially this concept measures how consumers react (in
terms of demand for a product) when producers change the price. This can work out in a
few different ways. If we use gasoline as an example, if the price of gasoline nationwide
increases by ten cents, the demand may stay mostly the same because obtaining a mode of
transportation that doesn't use gasoline would be far more inconvenient and expensive for
the normal consumer. However, if gas station A costs ten cents more per gallon than gas
station B down the street, gas station A can expect diminishing returns. Consumers
ultimately are focused on finding the best deal for their money, which is why you see
companies like Walmart doing so well.Gasoline is an inelastic good that I use regularly that
I still purchase regardless of price. As we all know, the price of gasoline is at an all-time
high, but as I stated above, we don't have a choice but to use it. An elastic product that I
have purchased less of due to higher prices are shoes. I collect shoes and over the last few
years, the prices have increased significantly. I have been cutting back on collecting
because of the higher prices.First, if the price of an elastic good goes up, I will be less
likely to buy it than if the price of an inelastic good goes up. If a product that is not
necessary to survive is no longer as expensive as one that is necessary to survive, then I
will not purchase the former and spend my money on the latter. This means that my
spending patterns will not change, even if I know that the price of the former has gone
down relative to the latter.Second, when prices change, it affects how much money I can
afford to spend on other things. If there are fewer resources available for consumption due
to fewer sales (which implies lower demand), then it will be more difficult for me to have
enough money left over after paying for food and shelter than before (which implies higher
demand). Apple charges for their phone just because it seems like the phone to have. With
their ever-changing line up of colors and software changes they make it seem like our life
would be incomplete without the newest Apple product. I used to use a Blackberry, then a
Samsung Galaxy and even though the technology was comparable it did not have the same
cache as the iPhone. In my view I can see that it would be an elastic want for some and an
inelastic need for others due to all of its functions. An elastic want is something we want
but is not essential for survival while an inelastic need is more of something we need to
survive.
