Essay on Elastic Demand : Market Comparisons

Essay on Elastic Demand : Market Comparisons

Length: 928 words (2.7 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

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 from buying for a period of time. Two different markets will be depicted each describing the determinants of elasticity demand which cause the goods to be elastic or inelastic.
Market One:
When a good is termed as elastic it likely has many substitutes. 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...


... middle of paper ...


...usly evaluates the price and demand of their products to increase their profitability.
In conslusion, the eslasticity demand of a product depends on many determinants. The number of subsitiutes are a key factor for companies to consider when pricing their goods and services. This is challenging for companies as they are in the business to make money while trying to cover their costs and beat their competition. Therefore, busineses try to get the highest price for their goods and services without sacrificing demand. A consumer’s budget and disposable income also plays a key role in the demand for good and services. Lastly, the increases in prices may only be temporary and the consumer may not necessarily notice the change. In a free market system the market will eventually right itself over time to the natural equilibrium for the good or service.




Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

The Effect Of Elastic And Inelastic Demand On The University 's Total Revenue

- ... “The relationship between total revenue and price elasticity of demand explains how firms set and change prices.” (Amacher & Pate, 2013, section 4.5) . For this reason, it is important for businesses to monitor goods and services that are of elastic demand or inelastic demand because their effects on total revenue play a significant role while making pricing decisions. The university’s price elasticity of demand, suggest that the increase in tuition led to a loss of revenue due to the demand of enrollment at the Nobody State University being elastic....   [tags: Supply and demand, Price elasticity of demand]

Better Essays
1033 words (3 pages)

The Effect Of Elastic And Inelastic Demand On The University 's Total Revenue

- ... Highly inelastic commodities are considered essentials, purchased irregularly, and may not have a lot of substitutes. “The relationship between total revenue and price elasticity of demand explains how firms set and change prices.” (Amacher & Pate, 2013, section 4.5) . For this reason, it is important for businesses to monitor goods and services that are of elastic demand or inelastic demand because their effects on total revenue play a significant role while making pricing decisions. Therefore, based on Nobody State University’s financial outcome and the concept of price elasticity of demand, the increase in tuition led to a loss of revenue due to the demand of enrolling at Nobody State...   [tags: Supply and demand, Price elasticity of demand]

Better Essays
734 words (2.1 pages)

Demand Of A Good And Demand Essay

- The Law of Demand states that “there is an inverse relationship between the price of a good and demand. As prices fall, we see an expansion of demand. If price rises, there will be a contraction of demand (Riley, 2016).” In the world of economics ‘demand’ refers to one’s willingness and ability to acquire goods or services. This means that one desires something enough that they are willing to procure it, therefore, creating a sense of demand. However, simply desiring a good or service is not the sole meaning behind demand....   [tags: Supply and demand, Economics, Cost]

Better Essays
1085 words (3.1 pages)

Essay on Demand Of Demand And Supply

- Demand and Supply In the economic world, have you ever thought of how demand estimation can be calculated and interpreted as it relates to a regression equation. Well, let me start by defining what demand estimation mean. Demand estimation is a process that involves coming up with an estimate of the amount of demand for a product or service within a particular period of time (Arthur, 2016). For the month of April, having the privilege to work for a maker of a leading brand of low-calorie, frozen microwavable food; while collecting the data from 26 supermarkets around the country has been an interesting experience....   [tags: Supply and demand, Consumer theory]

Better Essays
923 words (2.6 pages)

Elastic Cloud Computing Essay

- Elastic Cloud Computing Over 25,000 customers of the Barclay Bank identities were stolen and sold into the black market. This included customer earnings, savings and insurance policies (Condron). Currently, Barclay bank does not have a security system that can store customer information safely. The only technique that the bank is using to ensure that there is security is the finger-scan technology. The best opportunity for Barclay to have a safe and secure bank is to acquire elastic cloud computing....   [tags: hosting companies, black market, hijacking]

Better Essays
1163 words (3.3 pages)

Price Elasticity Of Demand And Demand Essay

- Price Elasticity of Demand According to Microeconomics, Price Elasticity of Demand is the responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the product’s price (Hubbard & O’Brien, 2015). Demand is considered elastic when the quantity demanded for a product increases or decreases in response to price change. Normally, sales increase with price drops and decrease when prices rise....   [tags: Soft drink, Coca-Cola, Supply and demand]

Better Essays
1580 words (4.5 pages)

The Current Market For Footwear, Booming, Fueled By Millennial Demand And The Organization 's Strategic Business

- ... This is about 6.4% higher than the last quarter of 2015, allowing for a prediction of about $10 billion pre-tax income for the full year 2016 (Hill, 2009). Figure 1: Revenue for Nike in America Source: Nike News, 2016 From the graph, it is evident that Nike has a high demand for products purchased by millennials. The trend is due to several factors, including quality and affordability of the products. The organization has also reinvented the design which attracts buyers by offering them a variety of shapes and colors....   [tags: Supply and demand, Price elasticity of demand]

Better Essays
1100 words (3.1 pages)

Demand Of Supply And Demand Essay

- ... 84) When the price of a good increases, producers will tend to offer more product for sale but, when the price lowers, that producer is less inclined to have sales for their product. The direct relationship between the supply offered and the price is known as the Law of Supply. A supply table shows the relationship between price of a good and how much of that good is supplied at the corresponding price. The supply curve is the graphical representation of this relationship. When a supply curve is going right and up, it shows the the price and quantity’s direct relationship....   [tags: Supply and demand, Demand curve]

Better Essays
2363 words (6.8 pages)

Price Elasticity Of Demand Measured Essay

- ... The value of advertisement elasticity is positive (0.1133) meaning that the product is elastic to the advertisement and is less than one. The effect on the quantity demanded money used in a commercial in the short term and the long run. Income elasticity: Ei= 5.2(5500/17,650) =1.62 which make this product inelastic to the income and this means a change in demand can affect revenue and pricing short term. Without lower, the price to increase demand the company revenue could be effect long term....   [tags: Supply and demand, Price elasticity of demand]

Better Essays
1188 words (3.4 pages)

Price Elasticity Of Demand And Demand Essay

- 1. What is the price elasticity of demand. How is the price elasticity of demand calculated. The price elasticity of demand as I understand it is how much demand for an item will change with a given change in the price of an item. To be more precise it is the percent change in demand per unit of time divided by the percent change in price. (Khan, "Price elasticity of demand") While most examples I could find of price elasticity of demand were linear, I do not think they would truly be that way in real life....   [tags: Supply and demand, Elasticity]

Better Essays
1291 words (3.7 pages)