Are There Real-World Examples of Perfectly Inelastic Goods

What can be named as examples of inelastic and elastic goods and what are examples in a real world aside from the theoretical part? Why are some goods inelastic in price and some elastic? All the answers are in this article as well as previous articles where we tackle upon the topic of elasticity and inelasticity.

Are There Real-World Examples of Perfectly Inelastic Goods

Substitution Effect

How elasticity can theoretically affect changes in price and quantity in a market economy is pretty much clear but does this really happen in the real world? While the demand for many goods is either not fully elastic or completely inelastic, economists assume that the demand for some goods will be more elastic than others and that the demand for a number of goods will be less elastic. So while extreme cases are quite rare, elasticity still has some influence on market behavior.


Goods with Elastic Demand

Goods with very elastic demand tend to be nonessential goods or goods that can be easily substituted for another good. As the prices of these products go up, consumers will decide that they don't really need the products and won't buy them, or they'll start replacing the products with cheaper alternatives. A possible example of a non-essential item might be candy. It's not a staple, and if the price doubles, demand is likely to drop a lot because consumers decide they don't really need to eat sweets, especially because it's so expensive. A good substitute could be cola. If the price of a cola brand goes up, demand will fall rapidly as consumers decide to buy a competing brand that has been priced the same.


Goods with Inelastic Demand

Goods with very inelastic demand tend to be goods with no easy substitutes or essential goods that consumers cannot do without. For these goods, even when prices rise, demand remains relatively stable, since consumers have no other choice and feel that they must always buy the same amount of the good. In the short term, gasoline can be seen as an inelastic commodity, since it is difficult to completely change the mode of transport in the face of changes in gasoline prices. (In the long run, however, consumers can change habits and reduce gas mileage by using public transit or carpooling, once they realize their costs have gone up permanently). Another example might be stapled foods. While luxury products like caviar or Belgian chocolate are not essential to our diets, basics like bread, pasta, and rice are relatively essential. In other words, the price increase will have less of an effect on the consumption of essential foods than it will on luxury foods.

References

WEB: SparkNotes - Sparknotes, 1 ... https://www.sparknotes.com/economics/micro/elasticity/section2/

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