See: Elasticity.
If the market for a good is elastic, it means it’s responsive: a large change in price will result in a large change in the quantity bought. For instance, a mega-sale results in a mega-sellout, and a large markup results in few of the items being bought.
Inelastic goods are the opposite. The price can change all it wants, but people will still buy the same amount of the good. Inelasticity implies that the amount of a good bought won’t change much (or at all) even if the price goes up a lot, or down a lot.
Toilet paper...on sale at a discount? Well, you’re still going to use the same amount (unless a bargain makes you constipated), so even if you stock up now, it’s an inelastic good in the long run. Toilet paper...marked up? Too bad; you decide to suck it up and pay the higher price (you’re just not ready to go back to how they did it in ye olden days with free newspapers).
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Finance: What is Elastic v Inelastic Dem...19 Views
And finance Allah Shmoop What is elastic versus in elastic
demand Okay well here's your underwear band I think the
bane of wedgies super wedgies atomic wedgies and over the
head mega glop wedgies all around the globe Well what
do they all have in common Stretchy nous The band
stretches and moves and gives goodness Well think about the
elastic as representing the marketplace for a paperback copy of
Moby Dick It's the same new paperback copy Freshly minted
with that you know new book smell It's the same
product whether you bite it Amazon or Barnes and Noble
or anywhere else for both people you know who shop
anywhere else and or Barnes and Noble Or at walmart
dot com which has thirty for more buyers than Barnes
and Noble So yeah that's the second place winner in
the book war saga Well Moby Dick here we go
Yeah same total commodity product and lots of sellers of
it So the volumes sold depending almost entirely on price
rather than well if the price of that book drops
like two percent while you just buy it wherever wherever
it's sold cheaper right total commodity So the curves move
around like elastic A buyer will go to the area
of least resistance price resistance And yeah it's like you
know what happens in that atomic super wedgie thing So
if elastic means no pricing power of the cellar and
likely very low margins for the cellar and a world
where the buyer has all the power than what in
elastic All right well it's when you try to do
an atomic wedgie on some dude wearing steel underwear like
you know this guy sirloin of beef Well then it
doesn't move The material is in elastic An elastic would
be the sole remaining copy of Moby Dick signed by
Melville himself and still with a little whale blubber oil
on the manuscript cover there There's only one copy in
the world and hundreds of billionaires all around the world
who read or maybe just care about important literature would
love that copy Could they sell it for fifty bucks
A thousand one hundred thousand A million shore Probably Sure
sure sure All the power then is with the one
seller of that product who can charge almost anything they
want when they go to sell it So think of
any elastic demand is being things you can't live without
Like that last drink of water fore a parched human
traveller in the desert You know prices go up or
down like this curve or line thing here and it
won't matter Buyers will pay and sellers will reap the
powered rewards of any elasticity Pull on a rubber band
for a while and it'll move It'll adjust your pressure
and if you crinkle up a thousand of these bad
boys and melt him to gather well they'll bounce for
a long time I think of them as being elastic
They move a lot just like markets Okay so let's
think about oil What about that Yeah highly elastic when
there's lots of supply While the highly competitive industry will
offer a gallon of gas for less and less and
less and less until it has sold out all the
marginal gas it can supply and still at least break
even All things considered so typically highly elastic industry sell
commodities where there's no difference in buying a gallon of
gas from Shell or Chevron or BP Or we've got
gas dot com or whoever So now go to the
other end of the street and try pulling on this
two by four Yeah you can pull all day long
at eight going nowhere unless you're Superman It is in
elastic Any elastic demand revolves around things that are irreplaceable
like those thirty five acres on the beach in Malibu
only exist in one place and a property like that
comes up for sale maybe once in a decade So
it carries any elasticity in its sales process in that
the seller can put almost any price at once on
the property and will likely get it The same applies
to rare vintage Ferraris The signed football used to score
the winning touchdown in the Super Bowl or elite plastic
surgeons for wealthy widows of billionaires Economists being economy you
know I want to make sure that elasticity is something
they can graph So the equation for elasticity goes something
like this percent change in quantity to manage over percent
change in the price There we go Well Q represents
the quantity and P represents the price There See very
cleverly named Take two points the quantity at point A
and then the quantity at point B like note those
then check the price at both of those points and
you figure out the percentage change and we'll just get
the ratio Well the answer gives you a measure of
the products elasticity Any number bigger than one is considered
to be elastic meaning It's kind of more commodity ish
The bigger the number the more elastic it is Like
water A normal water in any normal city is pretty
elastic Figures less than one answered like a point five
point o three Two would be any elastic like the
smaller the figure the more any elastic the more rare
Ferrari buyer like it is Well the math may seem
a tad complicated here but when graphed out well it
makes a lot of sense Visually the concepts are easy
to conceive So check out these curves Yeah not very
curvy Other factors besides simple supply and demand can play
into whether prices are elastic or any elastic Grover Bio
Genetics Inc provides a drug that cures a certain kind
of tale Cancer In dogs The drug is relatively simple
The manufacture Any moderately competent lab could produce it But
it's the consumer who feels the verticality of the demand
curves that is a dog owner whose pooch is suffering
from painful tale cancer will pay nearly anything to get
the drug needed to keep their dog alive and licking
their face will demand for the drug is very any
elastic Then right Rover Bio genetics can jack up the
price to whatever they want a jacket to and people
will pay it well The high price of the drug
has nothing to do with the manufacturing cost Remember the
drug is relatively easy to make It has to do
with the elasticity of the demand for it Biogenetic skin
charged a high price basically because they can welcome to
the world of supply demand economics in the elasticity Yeah
other complications can come into effect as well For instance
elasticity can change on one demand curves That is to
say different forces come into play in each curve area
when determining the demand elasticity Varying considerations impact consumers at
different points like you find out that you can get
a cheap generic equivalent of the tail cancer drug in
Mexico So your pack up little snookums and head down
to Tijuana The instructions on the drugs say to give
the pop two pills orally and then make sure to
give her plenty of water But the guy's front desk
warned you that they've had some plumbing issues lately and
you might not want to drink the tap water So
you have to feed snookums bottled water Teo you know
take with her pills Now the minibar has bottled water
It cost nine dollars for this little thing Nine dollars
Can you believe it Yes Nine You don't want to
leave Snow comes alone in the hotel room So you're
tempted Teo Just pay the high minibar price But if
you just leave the room for a few minutes while
you khun go to the hotel bar You know they
sell bottled water for still a whopping six dollars each
but at least he saved three bucks And then if
you're willing to take a longer trip while you can
you know uber toe walmart to Mexico and by water
in bulk for less than a dollar a bottle So
like why wouldn't you do that Yeah because well we're
all lazy but snow comes Yeah let's give her a 00:07:24.846 --> [endTime] little kiss In the world
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What is elasticity? Elasticity refers to the degree of demand to quality or price changes in the market to a product or service. Products or servic...