Ballpoint Pens: What�s Elastic?

(a) Ballpoint pens: The price elasticity of demand of ballpoints pens tends to be elastic. Now, what does it mean when an item is elastic? Well, according to the textbook, Microeconomics, written by McConnell, Brue, Flynn, it states,” When price and total revenue move in opposite directions, demand is elastic”(pg. 126, para.1). What this means is that when price goes up, demand goes down and when price goes down, demand goes up. A product like a ballpoint experiences elastic demand because it has many substitutes and has high competition which normally tends to help the consumer because there are many companies who produce the same product and this helps keep the price of the product low.

(b) Crest toothpaste: This particular product is a little harder to decide if the price elasticity of demand is elastic or inelastic. It’s difficult to choose either option because there tends to be high competition when it comes to teeth products, but there aren’t many substitutes to toothpaste. Ultimately, I believe this product is inelastic because if the price goes up, the demand shouldn’t go down because toothpaste is essentially considered a need in our society. Almost everyone in our society brushes their teeth everyday and that will be impossible to do efficiently without the use of toothpaste.

The major difference between these two items is the rarity of diamonds compared to a product like toothpaste. An item is inelastic when, “ price and total revenue move in the same direction”(McConnell, Brue, Flynn. Pg. 126. para. 3). The rise in the price of the product, in this case diamonds, doesn’t tend to affect the revenue since there are almost no substitutions. What is also common in inelastic demand is that when price declines, and what could happen with diamonds, is that the gain of sales will not match the total revenue of the price of the item did not