Elastic Demand Essay

Elastic Demand – Market Comparisons

Elasticity from a demand perspective refers to the response of the demand for a good as it relates to the changes in the price. When the consumers are responsive to a price change of a good or service it means the demand is relatively elastic. Conversely, when consumers are less rseponsive to a price change a good or service this demand situation is described as inelastic. More specifically, our text defines price elasticity as “the relative amount by which the quantity demanded will change in response to change in the price of a particular good” (Miller p. 415). Consumer’s tend to be sensitive to large price changes of common goods and may choose to purchase other goods and services or refrain

Many common grocery items are said to be very elastic because in today’s grocery store there many food alternatives to choose from. Recently, there has seen an increase in the price of eggs due to an ourbreak in bird flu. Therefore, egg suppliers have less inventory for their distributors causing a shortage. This shortage has caused an increase in the price of eggs. The shortage is impacting consumers as well in the grocery store. In a recent article, “Texas-based supermarket owner H-E-B recently announced it is limiting the number of cartons of eggs its customers can buy at all its stores” (La Monica). When the price of eggs rises above the norm, consumers simply switch to less expensive alternatives for cooking or simply avoid buying eggs for a period of time. Eggs are not a necessity for most consumers. Milk also tends to be elastic. There have been many times when milk has incurred shortages due to certain cow diseases affecting milk production. When milk prices are high there are substitute products such as goat milk and almond milk are options for consumers. For consumers with large disposable incomes, price increases on common items may not impact their purchase patterns as it may be a small percentage of their

Example, certain cancer fighting drugs can have perfrect inelastic demand. In these cases the demand stays relatively the same regardless of the price. Some specific branded medications do not have any competitors or generic substitutes. In some cases cancer patients have no choice but to buy the medication if they know it can help them beat the disease. On the other hand, consumers may be loyal to a certain brand and may become insensitive to price changes, resulting in more inelastic demand. In some extreme cases governmental agencies may step in if they discover that price gouging is taking place. Inelastic demand can be witnessed in the consumer electronics products industry as