This week in class we focused on elasticity. Elasticity is how consumers respond to changes in price. When something is elastic, the change in price has had a large effect on quantity demanded. When something is in inelastic, a change in price has a small effect on quantity demanded. When we talked in class about in-elasticity we talked about insulin. I have Diabetes, so this was an example I could relate to! For Diabetics, insulin is necessary to keeping them alive. So if the price for insulin increases, a Diabetic is still going to purchase the same amount. If the price for insulin decreases, the person with Diabetes isn't going to stock up and buy more, because insulin expires. Therefore insulin is inelastic.
I think this concept of elasticity is extremely important to understanding Economics. Elasticity basically shows us how to make more money for ourselves. Without it, we wouldn't be able to figure out why people buy more of products when the price is lower. We wouldn't be able to increase our total revenue. Elasticity also tells us in what situations we should keep the prices the same or that we can raise prices and not lose sales. Overall, I think this concept is very important to studying economics.
I completely agree with you. In understanding elasticity, we understand the fundamental goings on of an economy. It is so important for businesses to understand elasticity so they can make more money. If someone wanted to start selling a product, they would need to know how elastic the demand for their product is so they can be more successful. Without understanding elasticity, their business would fail.
ReplyDeleteI really enjoyed reading your article it helped me get a way better understanding on elasticity an inelastic you give great examples of both
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