Last Updated 28 Jan 2021

Price Elasticity

Category Goods
Words 276 (1 page)
Views 138

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 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.

Order custom essay Price Elasticity with free plagiarism report

GET ORIGINAL PAPER

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

This essay was written by a fellow student. You can use it as an example when writing your own essay or use it as a source, but you need cite it.

Get professional help and free up your time for more important courses

Starting from 3 hours delivery 450+ experts on 30 subjects
get essay help 124  experts online

Did you know that we have over 70,000 essays on 3,000 topics in our database?

Cite this page

Explore how the human body functions as one unit in harmony in order to life

Price Elasticity. (2018, Jul 21). Retrieved from https://phdessay.com/price-elasticity/

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

Save time and let our verified experts help you.

Hire writer