Elastic Demand Examples

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Many markets in today’s economy fall into two main categories in terms of demand. These categories are elastic demand and inelastic demand. Elasticity is simply how responsive the supply or demand curve is relative to price. As prices fluctuate on items we will sometime see changes in demand for those specific items. Many markets are affected by each type of demand. An example of elastic demand is the food industry and an example of inelastic demand is gasoline. Elastic demand markets cover a variety of products. Elastic items are items that have a change in demand based on price and can fluctuate regularly. An example of this would be the food industry. Prices of food related items can change for many reasons and when we see these…show more content…
Companies know this and will also monitor competitor prices because they know if their item is too high then the consumer will just purchase the competitors product. We often find in an elastic market that demand will change rapidly when prices increase and this coincides with a customer’s income. If someone’s income increases steadily and the price of a product also increases then more than likely that customer will still purchase that product. However, on the reverse side of things, if a customer’s income does not increase or they experience a decrease then that customer will probably not purchase that product. Companies in turn will use this information to determine if a change in price will cause a drastic change in demand. Food items fluctuate all the time and companies are always trying to make sure their prices are going to be competitive otherwise they could lose…show more content…
The food industry has many options or substitutes, however we have very few, if any substitutes for gasoline. Automobiles running on alternative energy or electric cars could be a substitute for gasoline, however most of these are far more expensive and not economically friendly. Other alternate options may be biking or walking, however these methods are good for only short distances. Inelastic items are very hard to replace because as I stated earlier these items are often needed and are not a luxury for most people. Another great example of inelastic demand is cigarettes. The price of cigarettes does not affect demand drastically because people often need these and are willing to pay almost any

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