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Elasticity refers to the responsiveness of the quantity demanded or supplied of a good to changes in its price or other factors. An elastic good has several characteristics: its demand significantly changes with price fluctuations, it typically has many substitutes available, and it often represents a non-essential item or luxury. For example, if the price of a specific brand of soda rises, consumers may quickly switch to a cheaper alternative, demonstrating high elasticity.
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If a good is a necessity with few substitutes then the price elasticity of demand will tend to be?
lower
Define elastic demand?
Elasticity is the percentage change in one variable resulting from a percentage change in another variable. Thus, the price elasticity of demand is the percentage change in quantity demanded of a good resulting from a percent change in its price. Elastic demand means that the percentage change in quantity demanded of the good is greater than the percentage increase in price. This means that the demand for a good is very sensitive relative to price. Therefore, if the price increases by one dollar the quantity demanded for that good will decrease by a lot and if the price decreases by one dollar the quantity demanded for that good will increase by a lot. The determinants of price elasticity of demand are: substitutes of the good, percentage of income the good's price, and the need of the good. Substitutes are other goods that have the same or similar function to the particular good; if there are many substitutes then the price will be elastic in which the primary good becomes too expensive consumers will switch their demand to a close substitute, and if there are not many substitutes the price will be inelastic in which the primary good becomes very expensive consumers will have to buy that good no matter what. If the price of the good is a large percent of the consumer's income the elasticity of demand will be high, since the consumer will not want to spend the majority of their income on one good. If the good is a necessity, for example food, then people will have to buy it no matter the price therefore it will be very inelastic. If the good is a luxury good like a yacht then the demand elasticity will be very elastic.
What products are elastic?
It depends a great deal on how widely you define the product. For example, the demand for "food" is completely inelastic, since there are no substitutes for "food". However, demand for apples will be far more elastic than the demand for food, since if the price of apples increases people can switch quite easily to a cheaper fruit. It is difficult to generalise what items are elastic, since not all items within the same group have equal "value" - brand loyalty for example will decrease elasticity for certain items. This means that, if I were to say that demand for baked beans was elastic, you could point out that Heinz baked beans experience far lower levels of price elasticity than other brands of baked beans. However, generally (very generally), unbranded/supermarket branded food items, when not defined too widely, will experience an elastic "price elasticity". Contrary to many expectations, fuel actually does seem to be price elastic - at least, to a certain level. Even though there are very few good substitutes for petrol etc... consumption does decrease when prices are raised.
Why Bread is elastic or inelastic?
Bread is generally considered to be inelastic in demand because it is a staple food item that people need for their daily nutrition. Even if the price of bread increases, consumers are likely to continue purchasing it because there are few substitutes that can fulfill the same dietary role. However, the level of elasticity can vary depending on the type of bread and consumer preferences, as some specialty breads might have more elastic demand. Overall, essential goods like bread tend to show inelastic demand characteristics.
Is the firms demand curve always elastic if the firm possesses monopoly power?
No, a firm's demand curve is not always elastic even if it possesses monopoly power. Monopolies can face inelastic demand for their products, particularly if there are few or no substitutes available, allowing them to set higher prices without losing many customers. The degree of elasticity depends on factors such as consumer preferences, availability of alternatives, and the nature of the product. Therefore, while monopolies may have some control over pricing, the elasticity of their demand curve varies based on market conditions.
If a good is a necessity with few substitutes then the price elasticity of demand will tend to be?
lower
Define elastic demand?
Elasticity is the percentage change in one variable resulting from a percentage change in another variable. Thus, the price elasticity of demand is the percentage change in quantity demanded of a good resulting from a percent change in its price. Elastic demand means that the percentage change in quantity demanded of the good is greater than the percentage increase in price. This means that the demand for a good is very sensitive relative to price. Therefore, if the price increases by one dollar the quantity demanded for that good will decrease by a lot and if the price decreases by one dollar the quantity demanded for that good will increase by a lot. The determinants of price elasticity of demand are: substitutes of the good, percentage of income the good's price, and the need of the good. Substitutes are other goods that have the same or similar function to the particular good; if there are many substitutes then the price will be elastic in which the primary good becomes too expensive consumers will switch their demand to a close substitute, and if there are not many substitutes the price will be inelastic in which the primary good becomes very expensive consumers will have to buy that good no matter what. If the price of the good is a large percent of the consumer's income the elasticity of demand will be high, since the consumer will not want to spend the majority of their income on one good. If the good is a necessity, for example food, then people will have to buy it no matter the price therefore it will be very inelastic. If the good is a luxury good like a yacht then the demand elasticity will be very elastic.
What products are elastic?
It depends a great deal on how widely you define the product. For example, the demand for "food" is completely inelastic, since there are no substitutes for "food". However, demand for apples will be far more elastic than the demand for food, since if the price of apples increases people can switch quite easily to a cheaper fruit. It is difficult to generalise what items are elastic, since not all items within the same group have equal "value" - brand loyalty for example will decrease elasticity for certain items. This means that, if I were to say that demand for baked beans was elastic, you could point out that Heinz baked beans experience far lower levels of price elasticity than other brands of baked beans. However, generally (very generally), unbranded/supermarket branded food items, when not defined too widely, will experience an elastic "price elasticity". Contrary to many expectations, fuel actually does seem to be price elastic - at least, to a certain level. Even though there are very few good substitutes for petrol etc... consumption does decrease when prices are raised.
Why Bread is elastic or inelastic?
Bread is generally considered to be inelastic in demand because it is a staple food item that people need for their daily nutrition. Even if the price of bread increases, consumers are likely to continue purchasing it because there are few substitutes that can fulfill the same dietary role. However, the level of elasticity can vary depending on the type of bread and consumer preferences, as some specialty breads might have more elastic demand. Overall, essential goods like bread tend to show inelastic demand characteristics.
Is the firms demand curve always elastic if the firm possesses monopoly power?
No, a firm's demand curve is not always elastic even if it possesses monopoly power. Monopolies can face inelastic demand for their products, particularly if there are few or no substitutes available, allowing them to set higher prices without losing many customers. The degree of elasticity depends on factors such as consumer preferences, availability of alternatives, and the nature of the product. Therefore, while monopolies may have some control over pricing, the elasticity of their demand curve varies based on market conditions.
How do substitution affect demand elasticity?
Substitutes affect demand elasticity by making demand more elastic; when consumers can easily switch to a similar product if the price of one increases, demand for that product becomes sensitive to price changes. If there are many close substitutes available, even a small price increase can lead to a significant drop in quantity demanded. Conversely, if few or no substitutes exist, demand tends to be inelastic, meaning consumers are less responsive to price changes. Overall, the availability of substitutes is a key determinant in assessing how elastic or inelastic the demand for a product will be.
How do the existence and similarity of substitutes affect the price leas its of demand for a good?
The existence and similarity of substitutes directly impact the price elasticity of demand for a good. When close substitutes are available, consumers can easily switch if the price of the good increases, making the demand for that good more elastic. Conversely, if there are few or no similar substitutes, demand tends to be more inelastic, as consumers have limited alternatives and are less responsive to price changes. Thus, the presence of substitutes generally leads to greater sensitivity in demand relative to price fluctuations.
What is the definition of elasticity of demand?
Demand elasticities refer to the response among consumers of a good to a change in the good's price. "Elastic" demand means that a small increase in price will lead to a relatively large decrease in demand (or vice versa). Goods with elastic demand curves tend to have many close substitutes. For example, demand for "tangerines" is more elastic than demand for "citrus fruits," because if the price of tangerines rises, you can switch to oranges etc. Likewise, the demand for "citrus fruits" is more elastic than the demand for "fruit," because if all citrus fruits rise in price, you can switch to apples, bananas, etc, but if the price of all fruits goes up, you're not likely to buy a leg of lamb instead. Items that are highly "inelastic" may be things that represent small portions of a consumer's budget. If salt goes from $.69 to $3, that is a huge increase in price. But will you stop buying salt? Highly unlikely, because it still represents a small portion of your income, and there are few if any less expensive substitutes. You might not even notice.
Does something have less elasticity when it is colder?
Yes, that is generally the case. When things get colder they become brittler. Brittle objects tend to break rather than deform and rebound. If you submerged a rubber ball in liquid nitrogen for a few moments and then dropped it from a height onto a rigid surface, it would shatter, not bounce. (Note that brittleness is not the same as rigidity. Objects can be rigid and elastic. For example, a steel girder is rigid and elastic.)
Using the concept of elasticity explain how a tax on gasoline would affect firms and consumers Who would pay the larger burden of the tax?
First, a quick discussion on elasticity of demand:When demand for an item is perfectly elastic, as prices increase the demand for the item decreasesWhen demand for an item is perfectly inelastic as prices increase the demand for the item does not changeIn the real world, few items are perfectly elastic or perfectly inelastic. Gasoline is an interesting item when it comes to elasticity. Gas is nearly perfectly inelastic at some levels of consumption because most people need to use it to get to work. This is starting to change however because as technology develops alternative fuels gas may become much more elastic. At some levels of consumption gas becomes elastic, for example if prices are too high some people will choose to skip a vacation soas not to consume gas.Now to explain elasticity of demand and taxes:When demand is perfectly inelastic, all of the tax will be passed on to the consumer.When demand is perfectly elastic, all of the tax will be passed on to the to the producer.So now to answer the question as to who would pay the larger burden of the tax. Right now (11/2009) gasoline is much more inelastic than it normally is (although it usually is still quite inelastic). For this reason, the majority of the tax on gasoline will be paid by the consumer.
How do you use the knowledge of elasticity to increase the revenue of a firm?
To my understanding, theoretically, the knowledge of elasticity can help in the revenue of the firm. However, it can be limited in practical terms as many other factors can affect revenue for the firm. In theory, if we are considering elasticity, what we are considering is the price of the good. You might need a graph to better understand the concepts of elasticity and revenue. Lets say the good has an elastic demand curve. This means that the demand curve is relatively flat, and the goods have a wide variety of substitutes. If this is the case, a good strategy will be to decrease the price of the good. If the price is decreased, and if the demand curve is elastic, theoretically the revenue of the firm will increase. From my interpretation, if the good has got a lot of substitutes, the firm can increase it's revenue by decreasing the price of it's good. This is because consumers are very sensitive to price changes, this means a small decrease in price, will mean a lot of customers will come and purchase the good. This can increase the revenue for the firm. On the other hand, if the demand curve is inelastic, an increase in the price of the good will increase the revenue for the firm. A demand curve that is inelastic is rather steep, and have few substitutes for the consumers. This means that consumers have little choice over product variety. An increase in the price of the product by the firm, will have few customers respond to it. What this means essentially is that the current customers will not repsond to changes in the price, hence they will not reduce the quantity demanded a lot, and they will not mind paying the high price. This can thus increase the revenue for the firm. In summary, if the product that a firm faces is elastic it's wise to decrease the price, as it will increase the revenue for the firm. On the other hand, if the product that a firm faces is inelastic, it's wise to increase the price of the good, as it will increase the revenue for the firm. Hope this helps.
Are there any mens pants with elastic waistbands?
Yes there are mens pants with elastic waistbands. JcPenny, Kmart, and Target are a few places that sell them. The ones at JcPenny are called : Men's Towncraft Plain Front Full Elastic Pants
