Identify some elastic and inelastic goods that you have purchased in the last month. Using the determinants of elasticity, explain why each good you selected is elastic or inelastic.
I have bought a number of goods with inelastic demand lately. Let me look at two of them here.
First, I bought a container of salt. It weighed 26 ounces and cost $.48. The demand for this product is inelastic because it does not take up a significant portion of my budget. If the price were to double, I could afford it just as easily as I can now and would surely not notice the difference.
Second, I bought a new air conditioner condenser for my car. This did cost a lot of money. However, demand for it would be inelastic even so. This is because it is something that has no real substitutes. Since I live in a place where it gets very hot in the summer, I need the air conditioner. Goods with no substitutes typically have inelastic demand.
I have also bought things whose demand is elastic. Let me look at two of them.
First, I bought a certain brand of whole wheat bread. Demand for this is rather elastic because there are many kinds of substitutes for it. I could have bought a different brand of bread. I could have bought a different type of bread (for example, 7-grain bread or white bread).
Second, I bought a pair of swimming trunks. Demand for this would typically be elastic because this is not something that the average person needs right away. People can easily afford to wait, as I did, until the item goes on sale.
The defination of an inelastic goods is " price change does not effect the demand" , in other words, " something that is a must-buy ".
Example: Eletricity , Water , Internet and cell-phone, ( these are payments that we need to make for living no matter the prices change or not, espciailly in Canada, Bc Hydro, such monopoly-type of company provides no alternative choices for customers. We can only go with the prices that they set.
The defination of an elastic good, however, works opposite. Change in price will effect how much people demand for it. For example, Brand-Clothing, or Snacks and Candies.