The Price Elasticity of Demand

What is similar or different between your post and theirs?
Explain to your classmate how one familiar product has some element of inelasticity to it, whether it be brand name, scarcity, consumer preference, or other reason.

My post.
The determinants of the price elasticity of demand are discussed in the following ways—the availability of substitutes is the main factor. If the alternative commodities have relatively lower prices, consumers will opt to go for such goods and forego those with higher prices. Determination if the good is a necessity or a luxury. Consumers’ response to a certain commodity after its change of price will lower their purchasing power if the good is a luxury. However, suppose the commodity is a necessity. In that case, individuals will tend to strive to achieve them in a limited amount due to insufficient finances. People’s response gets determined by the amount of salary used on commodities. In instances where a big proportion of income is being spent on the goods, consumers will tend to retain the proportion spent but acquire smaller amounts of commodities with the same amount. People’s response is equally affected by the amount of time that has elapsed since the time the price changed. If the period between the last change of prices and the current one is too low, individuals will have a negative attitude towards acquiring the goods (Marzano, 2018).
Bottled water is elastic in terms of price because there is plenty of tap water that is free. Gourmet coffee is inelastic because if prices change, then the demand for the product may not change. After all, users are used to a certain brand of coffee that is not available. Apple cell phones are inelastic since consumers may not be sensitive to prices because of the need to have a smartphone. Gasoline is inelastic because price changes have minimal influence on demand. Necessity is unavoidable, while luxury is pleasant but unnecessary in life. Price elasticity is affected by revenue in a direct proportion. The price elasticity of demand is important to the pricing since it helps design the prices allocated to goods that consumers can purchase (Moghaddam, 2018).

Jessica post

Identify the determinants of the price elasticity of demand. Explain each one.
Although it is impossible to determine what the price elasticity of demand would be in every situation, a few determinants shape the price elasticity of demand. One is acceptable substitute of goods or services that consumers decide to purchase when the normal product they purchase has a price increase. Time is also a factor as consumers need time to adjust to their buying behaviors. The size of a purchase depending on the consumer’s income, and whether the good is considered a luxury or necessity is also a determinant of the price elasticity of demand.
Determine whether each of the following items is elastic or inelastic: bottled water, gourmet coffee, Apple cell phones, and gasoline. Explain your reasoning.
Bottled Water is an elastic product. If prices were to go up on a brand of bottled water or even all brands of bottled water, there are several other avenues consumers can use to get water easily. They can drink from their faucets, they can get a cheap purifier, or they can use get water from their refrigerator’s water dispenser. Gourmet coffee is also an elastic product. It’s more of a luxury item and can easily be substituted for other beverages or lower cost coffee. Apple cell phones are also elastic products. It’s a luxury to purchase an Apple cell phone. There are multiple other types and brands of cell phones that can be purchased in place on an Apple cell phone for way cheaper. Gasoline is an inelastic product. Even when prices go up in gas, it is still necessary to use it to get around. This is not something that is easily replaced.
Distinguish between a necessity and a luxury.
Necessity goods are good people buy regardless of their income level, like food, water, and utilities used to live. Luxury goods are generally purchased when income rises to a certain level. Demand of necessary goods generally does not increase in proportion to the income of an individual. However, the demand for luxurious goods increased in proportion to the income on an individual.
How are the price elasticity of demand and total revenue related? Why is the price elasticity of demand important to pricing?
Price elasticity of demand describes how changes in the price for goods and the demand for those same good relate. As those two variables interact, they can have an impact on a company’s total revenue. As the price or the quantity sold of a product changes, those changes have a direct impact on revenue. The price elasticity of demand is important to pricing because it helps us understand consumers sensitivity to price changes.

Kristen post

Identify the determinants of the price elasticity of demand. Explain each one.
“Elasticity is a measure of how the dependent variable responds to changes in any one of the independent variables” (Amacher, R., & Pate, J., 2019, p. 4.1). Dependent variable is a variable (quantity demanded of good) whose value is dependent upon another and an independent variable (the price of the good) is a variable that is not depending upon another. Price elasticity of demand is the ratio or measurement of the percentage change in quantity demanded to the percentage change in price. There are two different types of elasticity – elastic or inelastic.
Elastic or elasticity of demand measures the demand shifts when other economic factors change – this is then broken down into subs: Price elasticity of demand, Substitute elasticity of demand and Income elasticity of demand. Inelasticity of demand is when a change in price doesn’t greatly impact the demand for that product. Example of elastic demand: food products – brand of chocolate or sports car – Ferrari or Lamborghini. If the price of a Ferrari increases, the demand will likely be elastic; meaning, the demand for Lamborghini will increase. There are also different alternatives such as Maserati or Bentley in which those demands will increase. Example of inelastic demand: gasoline or prescription drugs. If the price increases on gas, people will not just stop commuting to work or driving to the store or even picking up their kids from school; they will still purchase this gas even at a high price because they must commute. Same goes with prescription drugs. Chemotherapy is expensive already and if the price goes up – those who are dependent upon it will still purchase this drug because they need it.
Determine whether each of the following items is elastic or inelastic: bottled water, gourmet coffee, Apple cell phones, and gasoline. Explain your reasoning.
Bottled water, gourmet coffee, and iPhones are all elastic products. Gasoline on the other hand is an inelastic product. Bottled water, coffee and iPhones are not a necessity. If the price increased on these items, consumers would either stop buying or look for other brands. These are considered luxury items. Gasoline on the other hand is not considered a luxury item. As I explained before, if gasoline prices were to increase people will still purchase this high-priced gas because they need it to commute. Whether it is to make their money (going to work) to pay for more gas and their bills or for simple leisure.
Distinguish between a necessity and a luxury.
A necessity is something that we need such as food, gasoline, and housing. It’s necessary that we have these things to live our daily lives. Luxury is something that we necessarily want instead of needing – such as brand of vehicle, jewelry, and cell phone. We don’t need a vehicle although its necessary to have so we can save on costs and commute timing. In fact, there are other alternatives such as Uber, Lyft, or public transportation. Same goes with cell phones. We don’t need a certain brand of electronic. All we need is a device that can complete the necessary tasks we need completed on a daily basis.
How are the price elasticity of demand and total revenue related? Why is the price elasticity of demand important to pricing?
A change in price such as a decrease, increases the total revenue if the demand is elastic – also if there is an increase in price there will be a decrease in total revenue. They both have an opposing relationship. It is important because the relationship helps us understand if raising prices or lowering them will assist us in achieving our pricing objective, I believe.

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