logo image

Price Elasticity Essay

Fluctuation in product and service prices is interdependent with current demand and available supply. Too much supply lessens a product’s worth, decreasing consumer’s interest in the product. In all cases, the degree of intensity to which the price changes affect and react with supply and demand is called the price elasticity (Investopedia, 2008). Elasticity is determined by factors such as consumers’ income and their willingness to spend for the goods, time elapsed since price change, and the product or service’s necessity (Chen, 2008).

Daily necessities, which people will continue buying despite high prices, are inelastic since price changes do not affect demand. Conversely, luxury goods, which people do not essentially need, are very elastic. Lastly, price elasticity depends on the accessibility of substitute goods (Chen, 2008). Substitute goods are products that serve similar purpose and could be used in place of the original choice product (Piana, 2005).

To be attractive to consumers, a substitute product must satisfy the same needs and be of a good quality, but it must also be a cheaper and easily available alternative. These benefits can cause the consumer to switch from his or her first chosen product to the substitute one. The impact of the available substitute

Need essay sample on "Price Elasticity"? We will write a custom essay sample specifically for you for only $ 13.90/page

product to price elasticity is strong since regardless of whether the substitute is competing as necessity or luxury, people will always go for products that leave smaller dents in their wallets.

References Chen, G. (2008). Elasticity [PDF File]. Rutgers University. Retrieved December 22, 2008 from http://econweb. rutgers. edu/gchen/elasticity. pdf Investopedia. (2008). Elasticity. Retrieved December 22, 2008 from http://www. investopedia. com/university/economics/economics4. asp Piana, V. (2005). Substitute goods. Economics Web Institute. Retrieved December 22, 2008 from http://www. economicswebinstitute. org/glossary/substitute. htm

Can’t wait to take that assignment burden offyour shoulders?

Let us know what it is and we will show you how it can be done!
Sorry, but copying text is forbidden on this website. If you need this or any other sample, please register

Already on Businessays? Login here

No, thanks. I prefer suffering on my own
Sorry, but copying text is forbidden on this website. If you need this or any other sample register now and get a free access to all papers, carefully proofread and edited by our experts.
Sign in / Sign up
No, thanks. I prefer suffering on my own
Not quite the topic you need?
We would be happy to write it
Join and witness the magic
Service Open At All Times
Complete Buyer Protection
Plagiarism-Free Writing

Emily from Businessays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/chNgQy

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy