Assignment Details Price elasticity of demand measures consumers’ responsiveness

Question

Assignment Details

Price elasticity of demand measures consumers’ responsiveness to changes in the price of a good. There are a number of variables that affect consumers’ decisions, among them the following:

The availability of substitutes

The specific nature of the good

The part of income spent on the good

The time consumers have to buy the good

Please draw on your experiences as a consumer and your Unit 2 readings to address the following 4 topics. Make sure you use economic concepts in your main contribution.

Choose a product that you have purchased in the past 1–3 months from a clothing or shoe store.

Describe how each of the 4 factors listed above contributed to the elasticity of the good.

Is the product considered elastic, inelastic, or unitary elastic?

What effect does the current supply and current demand have on this product?

Explanation / Answer

Ans. This is a very interesting question. Let's start answering :

Let us assume , I bought a Adidas SST Track Jacket for $75.

Now , let us see that how did the Four Factors listed in the question would effect the elasticity of the Jacket.

1) The goods that can be substituted for each other are known as Substitute Goods. If Price of Adidas Jacket would rise , Demand for Rebook Jackets may increase because they would become cheaper with respect to the Adidas Jacket. This means that demand for jacket is more elastic as it is having a lot of substitutes.

2) If goods are a necessity for the consumers , then elasticity would be less because consumers would not change their demand with increase in prices. Adidas Jackets are not really a necessity , people can buy jackets of other local brands too. Hence Demand for Adidas Jackets would be elastic.

3) If huge Part of Income is spent on the goods , then change in price would surely change the Demand of the Goods. My income is certainly less , then a good Proportion of my Income is spent on Adidas Jacket. Thus an increase in Price would restrict my demand for Adidas Jacket.

4) If Price of the goods change for Short Period of Time , then Demand may not Change but if Price Changes for Long Term then Consumer can change their Consumption Habits. If Price of Adidas Jackets Change for Short Period , Demand may be inelastic and if Price of Adidas Jackets Increase for long time , Demand would be elastic.

Talking from the perspective of a Middle Income Person , The Product is considered Elastic.

Current Supply and Current Demand determine the Price at which good is sold in the market. It the Current Supply of the Adidas Jacket would increase, it's Prices would decrease and People would buy more jackets , hence Quantity would Increase. If Current Demand of the Adidas Jacket would Increase , it's Price would go up and Quantity would also go up. Reverse is also true when Supply and Demand Decreases.

Note - I have given the impact of the four factors from the perspective of a Middle Income man. Results may vary when we change the Reference. Note , Nothing is Wrong in Economics.

I hope you understood the answer. Do ask in case of Doubts.

A Thumsup would be Highly Appreciated !!

Best of Luck !! Keep Chegging !!

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