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Understanding Elastic and Inelastic Demand and Supply Dynamics

This article explores the concepts of elastic and inelastic demand and supply, highlighting how price changes affect the quantity demanded. Demand elasticity signifies the sensitivity of demand to price changes, with some goods like turkeys maintaining stable demand regardless of price increases due to their necessity during specific occasions like Thanksgiving. In contrast, goods with substitutes are considered elastic. The article also examines supply elasticity, emphasizing the challenges producers face in rapidly adjusting supply in response to price changes, using examples like oil and consumer goods.

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Understanding Elastic and Inelastic Demand and Supply Dynamics

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  1. Elastic and inelastic demand and supply Demand Elasticity is the change in price that causes a change in the quantity demanded. However-some things don’t always follow the law of demand. When prices go up demand DOES NOT Change.

  2. Examples: Turkeys on Thanksgiving. If Harris –Teeter raises the price on turkeys it will not have much of an effect on the purchase since turkeys are a staple of most Thanksgiving meals. At other times the demand would be affected. • Other examples: pepper, electricity, and medicines. ***When a product has few or no substitutes then it is inelastic.

  3. Demand Elasticity: As price changes, demand changes. • When people can choose an alternative or substitute then the product is elastic. • Luxury items are elastic.

  4. Elasticity of Supply • Supply of elasticity is a measure of how the quantity supplied of a good or service is affected by a change in price. • Elasticity depends on how quickly a company can change the amount it produces. • Ex: oil is supply inelastic. An oil company cannot quickly dig a new well, repair a damaged oil rig, or build a pipeline quickly. • For kites, candy, soft drinks, t-shirts,-supply is elastic. Suppliers can quickly produce and make these kinds of goods and will adjust to price changes.

  5. Ask yourself the question-What makes a product supply inelastic? • The inability to increase supply quickly in response to demand and increased prices. • Ex: Gas

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