Elastic Demand Paper
Dropbox Assignment #2 An elastic demand is a demand that if the price changes the quantity that is demanded changes quite a bit, and an inelastic demand is no matter the price there will still be a demand for it (Economics, 2017). Generally, an elastic demand is a type of good that is more of a want rather a need, and an inelastic demand would be something that would be along the lines of a necessity. To figure out the elasticity a person would use the equation: (% change in quantity/% change in price). If the elasticity is greater than one or equal to one then it is elastic, and if it is less than one then it is considered inelastic (Economics, 2017). This paper will examine the inelastic demand of gasoline, the elastic demand of clothing, and the purchases that I make in my life that are most elastic and inelastic. Gasoline would be considered a need and not a product that is just a want, this is what makes it inelastic. Regardless, the price of gasoline and the quantity demanded is always about the same (Gasoline, 2017). Usually when there is a price increase in gasoline it is to bring supply and demand into balance (Gasoline, 2017). One of the main reasons people are willing to pay more for gasoline is because there are not substitutes for gasoline. A very small
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percentage of people may have switched to electric cars but many people still use gasoline powered cars. When the price of gasoline raises, people will find ways to afford the price increase. For most, they will spend less money on taking vacations or spend less money eating out at restaurants. When deciding inelastic demands from elastic demands in my life gasoline would be at the top of the list for inelastic demands purchased. If gasoline prices are higher then I will try to steer away from spending money on things I don’t necessarily need, to put that money towards gas. Another inelastic demand that affects my life would be electricity the reason this is an inelastic demand is because there are no close substitutes for it. For this reason, I try to make sure lights are off when no one is using that room and not have the air conditioning or heat on if it is not necessary. Water would also be an inelastic demand, all of society could not survive without water and there is no substitute for it. Luckily, water is relatively cheap if bought at the store and does not cost too much a month. Clothing would be considered an elastic demand because there are numerous substitutes for clothing. If a person has a tight budget there are many stores that sell affordable clothing and even second hand stores that are even more affordable. Also, if a person takes their clothing brands very serious and wants the best of the best then that is an option as well. For many clothing businesses, it is important that they are not overpricing their clothing. If a competitor has similar clothes for less of the price then the demand for the more expensive clothing will go down, and could cause the company to go out of business for not being able to move their inventory. When being in a business that sells products that are relatively elastic it is important to be aware of your competitors and how they are pricing. When deciding what goods in my life are elastic clothing would be one of them.
I prefer to purchase more expensive better quality jeans and shoes but other than that I prefer to get the rest of my clothing at a reasonable price and I have many alternatives to choose from. Another elastic demand in my life would be food. When I am grocery shopping, I will buy some food that is Great Value because it is a cheaper alternative and the taste and quality is very similar to the name brand version. Buying a car would also be an elastic demand there are endless amounts of cars to choose from to buy and I like to be aware of the similar cars and their prices to see which one is the best for the
money. Overall, elastic and inelastic demands are something that affects everyone’s day to day lives. It is important to be aware of elastic demands and the similar substitutes that are out there and that money could in turn be put towards the price of inelastic demands. I am now more aware of how the elasticity of the things I buy affect me, and to what extent.
percentage of people may have switched to electric cars but many people still use gasoline powered cars. When the price of gasoline raises, people will find ways to afford the price increase. For most, they will spend less money on taking vacations or spend less money eating out at restaurants. When deciding inelastic demands from elastic demands in my life gasoline would be at the top of the list for inelastic demands purchased. If gasoline prices are higher then I will try to steer away from spending money on things I don’t necessarily need, to put that money towards gas. Another inelastic demand that affects my life would be electricity the reason this is an inelastic demand is because there are no close substitutes for it. For this reason, I try to make sure lights are off when no one is using that room and not have the air conditioning or heat on if it is not necessary. Water would also be an inelastic demand, all of society could not survive without water and there is no substitute for it. Luckily, water is relatively cheap if bought at the store and does not cost too much a month. Clothing would be considered an elastic demand because there are numerous substitutes for clothing. If a person has a tight budget there are many stores that sell affordable clothing and even second hand stores that are even more affordable. Also, if a person takes their clothing brands very serious and wants the best of the best then that is an option as well. For many clothing businesses, it is important that they are not overpricing their clothing. If a competitor has similar clothes for less of the price then the demand for the more expensive clothing will go down, and could cause the company to go out of business for not being able to move their inventory. When being in a business that sells products that are relatively elastic it is important to be aware of your competitors and how they are pricing. When deciding what goods in my life are elastic clothing would be one of them.
I prefer to purchase more expensive better quality jeans and shoes but other than that I prefer to get the rest of my clothing at a reasonable price and I have many alternatives to choose from. Another elastic demand in my life would be food. When I am grocery shopping, I will buy some food that is Great Value because it is a cheaper alternative and the taste and quality is very similar to the name brand version. Buying a car would also be an elastic demand there are endless amounts of cars to choose from to buy and I like to be aware of the similar cars and their prices to see which one is the best for the
money. Overall, elastic and inelastic demands are something that affects everyone’s day to day lives. It is important to be aware of elastic demands and the similar substitutes that are out there and that money could in turn be put towards the price of inelastic demands. I am now more aware of how the elasticity of the things I buy affect me, and to what extent.