{"id":4221,"date":"2016-01-09T06:52:44","date_gmt":"2016-01-09T06:52:44","guid":{"rendered":"https:\/\/courses.candelalearning.com\/waymakerintromarketing1xmaster\/?post_type=chapter&#038;p=4221"},"modified":"2024-05-15T15:38:49","modified_gmt":"2024-05-15T15:38:49","slug":"reading-products-with-elastic-and-inelastic-demand","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/chapter\/reading-products-with-elastic-and-inelastic-demand\/","title":{"raw":"Reading: Products with Elastic and Inelastic Demand","rendered":"Reading: Products with Elastic and Inelastic Demand"},"content":{"raw":"Now that you've had some practice calculating the value of elasticity, let's turn to some of the factors that play a role in whether a product is likely to have elastic or inelastic demand. The following factors can have an effect\u00a0on elasticity:\r\n<ul>\r\n \t<li><strong>Substitutes<\/strong>: If it's easy to choose\u00a0a different product\u00a0when prices change, the demand will be more elastic. If there are few or no alternatives, demand will be more inelastic.<\/li>\r\n \t<li><strong>Absolute price<\/strong>: When a product is very expensive, even a small percentage change in price will make it prohibitively expensive to more buyers. If the price of a product is a tiny percentage of the buyer's overall spending power, then a change in price will have less impact.<\/li>\r\n \t<li><strong>Importance of use<\/strong>: In our previous example, we examined\u00a0the elasticity of demand for cookies. A buyer may enjoy a cookie, but it doesn't\u00a0fulfill a critical need the way a snow shovel after a blizzard or a life-saving drug does.\u00a0In general, the more important the product's use, the more inelastic\u00a0the demand will be.<\/li>\r\n \t<li><strong>Competitive dynamics<\/strong>: Goods that are produced by a monopoly generally have inelastic demand, while products that exist\u00a0in a competitive\u00a0marketplace have elastic demand. This is because a competitive marketplace will create more options for the buyer.<\/li>\r\n<\/ul>\r\nWith these considerations\u00a0in mind, take a moment to see if you can figure out which of the following products have elastic demand and which have inelastic demand. It may be helpful to remember that when the buyer is <strong>in<\/strong>sensitive to price, demand is <strong>in<\/strong>elastic.\r\n<div class=\"textbox examples\">\r\n<h3>Gasoline<\/h3>\r\n<h4>Gasoline (Generic Need)<\/h4>\r\nThe demand for gasoline generally is fairly <strong>inelastic<\/strong>. Car travel requires gasoline. The substitutes for car travel offer less\u00a0convenience and control. Much car travel is necessary for people to move between activities and cannot be reduced to save money.\r\n<h4>Gas from a Specific Station<\/h4>\r\nThe demand for gasoline from any single gas station, or chain of gas stations, is highly<strong> elastic<\/strong>. Buyers can choose between comparable products based on price. There are often many stations in a small geographic area that are equally convenient.\r\n\r\n<\/div>\r\n<div class=\"textbox examples\">\r\n<h3>College Textbooks<\/h3>\r\n<h4>Traditional Textbooks<\/h4>\r\nGenerally an instructor assigns a textbook to the student, and the student who wants access to the learning materials must buy it, regardless of the price. Because the student can\u2019t easily identify another textbook or resource that will ensure the same content\u00a0and grade for the class, he has no substitutes and must buy the book at any price. Thus the demand is\u00a0<strong>inelastic<\/strong>.\r\n<h4>New Textbook Distribution Channels<\/h4>\r\nIncreasingly, students have new options to buy the same textbooks from different distribution channels at different price points.\u00a0The introduction of new distribution channels is increasing options for buyers and having an impact on\u00a0the price elasticity for publishers.\r\n\r\n<\/div>\r\n<div class=\"textbox examples\">\r\n<h3>Coffee<\/h3>\r\n<h4>Specialty Coffee Drinks<\/h4>\r\n<h4><img class=\"alignright\" src=\"https:\/\/images.unsplash.com\/photo-1442550528053-c431ecb55509?ixlib=rb-0.3.5&amp;q=80&amp;fm=jpg&amp;crop=entropy&amp;s=002d806c6524cb4a31979f70553f278a#fixme\" alt=\"Coffee beans\" width=\"350\" height=\"233\" \/><\/h4>\r\nMany coffee shops have developed branded drinks and specialized experiences in order to reduce substitutes and build customer loyalty. While black coffee is available almost universally, there are few substitutes for a Starbucks Java Chip Frappuccino. Demand for such products is more <strong>inelastic<\/strong>.\r\n<h4>Black Coffee<\/h4>\r\nCoffee is generally widely available at a level of quality that meets the needs of most buyers. The combination of a low price, relative to the buyer\u2019s spending power, and the fact that the product is sold by many different suppliers in a competitive market make the demand highly <strong>elastic<\/strong>.\r\n\r\n<\/div>\r\n<div class=\"textbox examples\">\r\n<h3>Tickets<\/h3>\r\n<h4>Concert Tickets<\/h4>\r\nOnly Taylor Swift can offer a Taylor Swift concert. She holds a monopoly on the creation and delivery of that experience. There is no substitute, and loyal fans are willing to pay for the experience. Because it is a scarce resource and the delivery is tightly controlled by a single provider, access to concerts has <strong>inelastic<\/strong> demand.\r\n<h4>Airline Tickets<\/h4>\r\nAirline tickets are sold in a fiercely competitive market. Buyers can easily compare prices, and buyers experience the services provided by competitors as being very similar. Buyers can often choose not to travel it the cost is too high, or to substitute travel by car or train. This makes the demand <strong>elastic<\/strong>.\r\n\r\n<\/div>\r\n<div class=\"textbox examples\">\r\n<h3>Health<\/h3>\r\n<h4>Medical Procedures<\/h4>\r\nEssential medical procedures have inelastic demand. The patient will pay what she can or what she must. In general, products that significantly affect health and well-being have <strong>inelastic<\/strong> demand.\r\n<h4>Soft Drinks<\/h4>\r\nSoft drinks and many other nonessential items have highly <strong>elastic<\/strong> demand. There is competition among every brand and type of soda, and there are many substitutes for the entire category of soft drinks.\r\n\r\n<\/div>","rendered":"<p>Now that you&#8217;ve had some practice calculating the value of elasticity, let&#8217;s turn to some of the factors that play a role in whether a product is likely to have elastic or inelastic demand. The following factors can have an effect\u00a0on elasticity:<\/p>\n<ul>\n<li><strong>Substitutes<\/strong>: If it&#8217;s easy to choose\u00a0a different product\u00a0when prices change, the demand will be more elastic. If there are few or no alternatives, demand will be more inelastic.<\/li>\n<li><strong>Absolute price<\/strong>: When a product is very expensive, even a small percentage change in price will make it prohibitively expensive to more buyers. If the price of a product is a tiny percentage of the buyer&#8217;s overall spending power, then a change in price will have less impact.<\/li>\n<li><strong>Importance of use<\/strong>: In our previous example, we examined\u00a0the elasticity of demand for cookies. A buyer may enjoy a cookie, but it doesn&#8217;t\u00a0fulfill a critical need the way a snow shovel after a blizzard or a life-saving drug does.\u00a0In general, the more important the product&#8217;s use, the more inelastic\u00a0the demand will be.<\/li>\n<li><strong>Competitive dynamics<\/strong>: Goods that are produced by a monopoly generally have inelastic demand, while products that exist\u00a0in a competitive\u00a0marketplace have elastic demand. This is because a competitive marketplace will create more options for the buyer.<\/li>\n<\/ul>\n<p>With these considerations\u00a0in mind, take a moment to see if you can figure out which of the following products have elastic demand and which have inelastic demand. It may be helpful to remember that when the buyer is <strong>in<\/strong>sensitive to price, demand is <strong>in<\/strong>elastic.<\/p>\n<div class=\"textbox examples\">\n<h3>Gasoline<\/h3>\n<h4>Gasoline (Generic Need)<\/h4>\n<p>The demand for gasoline generally is fairly <strong>inelastic<\/strong>. Car travel requires gasoline. The substitutes for car travel offer less\u00a0convenience and control. Much car travel is necessary for people to move between activities and cannot be reduced to save money.<\/p>\n<h4>Gas from a Specific Station<\/h4>\n<p>The demand for gasoline from any single gas station, or chain of gas stations, is highly<strong> elastic<\/strong>. Buyers can choose between comparable products based on price. There are often many stations in a small geographic area that are equally convenient.<\/p>\n<\/div>\n<div class=\"textbox examples\">\n<h3>College Textbooks<\/h3>\n<h4>Traditional Textbooks<\/h4>\n<p>Generally an instructor assigns a textbook to the student, and the student who wants access to the learning materials must buy it, regardless of the price. Because the student can\u2019t easily identify another textbook or resource that will ensure the same content\u00a0and grade for the class, he has no substitutes and must buy the book at any price. Thus the demand is\u00a0<strong>inelastic<\/strong>.<\/p>\n<h4>New Textbook Distribution Channels<\/h4>\n<p>Increasingly, students have new options to buy the same textbooks from different distribution channels at different price points.\u00a0The introduction of new distribution channels is increasing options for buyers and having an impact on\u00a0the price elasticity for publishers.<\/p>\n<\/div>\n<div class=\"textbox examples\">\n<h3>Coffee<\/h3>\n<h4>Specialty Coffee Drinks<\/h4>\n<h4><img loading=\"lazy\" decoding=\"async\" class=\"alignright\" src=\"https:\/\/images.unsplash.com\/photo-1442550528053-c431ecb55509?ixlib=rb-0.3.5&amp;q=80&amp;fm=jpg&amp;crop=entropy&amp;s=002d806c6524cb4a31979f70553f278a#fixme\" alt=\"Coffee beans\" width=\"350\" height=\"233\" \/><\/h4>\n<p>Many coffee shops have developed branded drinks and specialized experiences in order to reduce substitutes and build customer loyalty. While black coffee is available almost universally, there are few substitutes for a Starbucks Java Chip Frappuccino. Demand for such products is more <strong>inelastic<\/strong>.<\/p>\n<h4>Black Coffee<\/h4>\n<p>Coffee is generally widely available at a level of quality that meets the needs of most buyers. The combination of a low price, relative to the buyer\u2019s spending power, and the fact that the product is sold by many different suppliers in a competitive market make the demand highly <strong>elastic<\/strong>.<\/p>\n<\/div>\n<div class=\"textbox examples\">\n<h3>Tickets<\/h3>\n<h4>Concert Tickets<\/h4>\n<p>Only Taylor Swift can offer a Taylor Swift concert. She holds a monopoly on the creation and delivery of that experience. There is no substitute, and loyal fans are willing to pay for the experience. Because it is a scarce resource and the delivery is tightly controlled by a single provider, access to concerts has <strong>inelastic<\/strong> demand.<\/p>\n<h4>Airline Tickets<\/h4>\n<p>Airline tickets are sold in a fiercely competitive market. Buyers can easily compare prices, and buyers experience the services provided by competitors as being very similar. Buyers can often choose not to travel it the cost is too high, or to substitute travel by car or train. This makes the demand <strong>elastic<\/strong>.<\/p>\n<\/div>\n<div class=\"textbox examples\">\n<h3>Health<\/h3>\n<h4>Medical Procedures<\/h4>\n<p>Essential medical procedures have inelastic demand. The patient will pay what she can or what she must. In general, products that significantly affect health and well-being have <strong>inelastic<\/strong> demand.<\/p>\n<h4>Soft Drinks<\/h4>\n<p>Soft drinks and many other nonessential items have highly <strong>elastic<\/strong> demand. There is competition among every brand and type of soda, and there are many substitutes for the entire category of soft drinks.<\/p>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-4221\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Products with Elastic and Inelastic Demand. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Coffee Beans. <strong>Authored by<\/strong>: Mark Daynes. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/unsplash.com\/photos\/QKylkd3HS6o\">https:\/\/unsplash.com\/photos\/QKylkd3HS6o<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/about\/cc0\">CC0: No Rights Reserved<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":20,"menu_order":23,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Products with Elastic and Inelastic Demand\",\"author\":\"\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Coffee Beans\",\"author\":\"Mark Daynes\",\"organization\":\"\",\"url\":\"https:\/\/unsplash.com\/photos\/QKylkd3HS6o\",\"project\":\"\",\"license\":\"cc0\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"e3c87806-b27f-42b4-948d-e36540cdbb7c","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-4221","chapter","type-chapter","status-publish","hentry"],"part":220,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/pressbooks\/v2\/chapters\/4221","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/wp\/v2\/users\/20"}],"version-history":[{"count":11,"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/pressbooks\/v2\/chapters\/4221\/revisions"}],"predecessor-version":[{"id":7669,"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/pressbooks\/v2\/chapters\/4221\/revisions\/7669"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/pressbooks\/v2\/parts\/220"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/pressbooks\/v2\/chapters\/4221\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/wp\/v2\/media?parent=4221"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/pressbooks\/v2\/chapter-type?post=4221"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/wp\/v2\/contributor?post=4221"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/wp-json\/wp\/v2\/license?post=4221"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}