Goods with Different Elasticity of Demand from Daily

Goods with Different
Elasticity of Demand
from Daily Life By- Madhu Sikaria
Introduction:
Price elasticity of demand is an economic measure of the change in the quantity demanded or purchased of a
product in relation to its price change. Expressed mathematically, it is:
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
Price elasticity is used by economists to understand how supply or demand changes given changes in price to
understand the workings of the real economy. For instance, some goods are very inelastic, that is, their prices
do not change very much given changes in supply or demand, for example people need to buy gasoline to get
to work or travel around the world, and so if oil prices rise, people will likely still buy just the same amount of
gas. On the other hand, certain goods are very elastic, their price moves cause substantial changes in its
demand or its supply.
5 Degrees Of Elasticity Of
Demand:
1. Perfectly Elastic Demand:
Perfectly elastic demand is said to
happen when a little change in
price leads to an infinite change in
quantity demanded. A small rise in
price on the part of the seller
reduces the demand to zero. In
such a case the shape of the
demand curve will be horizontal
straight line.
Demand:
2. Perfectly Inelastic Demand:
Perfectly inelastic demand is
opposite to perfectly elastic
demand. Under the perfectly
inelastic demand, irrespective of
any rise or fall in price of a
commodity, the quantity
demanded remains the same.
Demand:
3. Unitary Elastic Demand:
The demand is said to be unitary
elastic when a given proportionate
change in the price level brings
about an equal proportionate
change in quantity demanded.
The numerical value of unitary
elastic demand is exactly one i.e.
Marshall calls it unit elastic.
Demand:
4. Relatively Elastic Demand:
Relatively elastic demand refers to
a situation in which a small
change in price leads to a big
change in quantity demanded. In
such a case elasticity of demand is
said to be more than one (ed > 1).
Demand:
5. Relatively Inelastic Demand:
Under the relatively inelastic
demand, a given percentage
change in price produces a
relatively less percentage change
in quantity demanded. In such a
case elasticity of demand is said to
be less than one (ed < 1).
Examples from our Daily Life:
1. Salt : Salt is Perfectly Inelastic Demand because there are no good
substitutes and it is a necessity to most people, and it represents a
small proportion of most people's budget.
2. Toothpicks: Toothpicks are Perfectly Inelastic Demand because they
cost very little and represent a small percentage of a typical grocery
budget and have few substitutes. Toothpicks are not a necessity
Examples from our Daily
Life:
3. Medicines: It is highly inelastic because these goods are necessary
goods or essential goods, because life is not possible without these
medicines. A patient cannot survive without certain essential medicines
like Insulin, tablets for blood pressure etc. for even a single day.
4. Clothes: The price elasticity of clothes demand are elastic because a
slightly changes in price may cause a huge changes in quantity demanded.
Examples from our Daily
Life:
5. Shampoo: It is an elastic product since demand tends to go down
when prices go up. There are too many competitor shampoo products
that must be considered to set a price.
Determinants of Elasticity:
1. Nature of commodity: Necessaries have less than unitary elastic demand whereas, luxuries have more than unitary elastic
demand.
2. Time period: Demand is inelastic in short period but elastic in long period.
3. Price level: elasticity of demand will be high at higher level of the price of the commodity and low at lower level of price.
4. Diversity of uses: Commodities that can be put to variety uses have elastic demand. On the other hand, if a commodity has only
few uses, its demand is likely to be less elastic.5) Habit of consumers: Goods to which consumers become habitual will have inelastic
demand. Consumer Income: The income of the consumer also affects the elasticity of demand. For high-income groups, the demand
is said to be less elastic as the rise or fall in the price will not have much effect on the demand for a product.
5.Amount of Money Spent: The elasticity of demand for a product is determined by the proportion of income spent by the individual
on that product. In case of certain goods, such as matchbox, salt a consumer spends a very small amount of his income, let’s say Rs 2,
then even if their prices rise the demand for these products will not be affected to a great extent.
Determinants of Elasticity:
6.Whether the Demand can be Postponed or not: If the demand for a particular product cannot be postponed then, the demand is
said to be inelastic. Such as, Wheat is required in daily life and hence its demand cannot be postponed. On the other hand, the
items whose demand can be postponed is said to have elastic demand. Such as the demand for the furniture can be postponed
until the time its prices fall.
7. Existence of Substitutes: The substitutes are the goods which can be used in place of one another. The goods which have close
substitutes are said to have elastic demand. Such as, tea and coffee are close substitutes and if the price of tea increases, then
people will switch to the coffee and demand for the tea will decrease significantly. Whereas, if there are no close substitutes for a
product, then its demand is said to be inelastic. Such as salt and sugar do not have their close substitutes and hence lower is their
price elasticity.
8. Joint Demand: The elasticity of demand also depends on the complementary goods, the goods which are used jointly. Such as car
and petrol, pen and ink, etc. Here the elasticity of demand of secondary (supporting) commodity depends on the elasticity of
demand of the major commodity. Such as, if the demand for pen is inelastic, then the demand for the ink will also be less elastic.
9. Range of Prices: The price range in which the commodities lie also affects the elasticity of demand. Such as the higher range
products are usually bought by the rich people, and they do not care much about the change in the price and hence the demand for
such higher range commodities is said to be inelastic

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