Hello, scholars! We know that when you hear the term “Demand Elasticity,” it might sound like a complex idea. But fear not, because in this blog by Art of Learnings- the best economics coaching in Delhi , is going to unravel this concept in a way that’s easy to understand and incredibly relevant for your Economics Class 11 syllabus .
Let’s take an intriguing trip through economics to solve the mystery of demand elasticity with AOL Economics. Consider yourself in a store, examining a product you wish to purchase. But have you ever questioned why the cost can influence your choice? Demand elasticity can assist us in analyzing these purchasing patterns in this situation. We’re here to help you at every turn, making you a demand elasticity expert in no time!
Understanding Demand Elasticity
Okay, let’s start with the fundamentals. What individuals want to buy at various price points is what drives demand. You inquire what elasticity is. It’s like having a superpower that lets you see how much people’s buying patterns vary when prices change. Think of it as a tool to determine whether or not consumers are extremely sensitive to price fluctuations.
Let’s use real-life examples with AOL Economics to explain this further. Consider your preferred snack. Would you still buy it if the price increased somewhat, or would you choose to save your money? That is the sort of circumstance where demand elasticity comes into play.
Elastic Demand | Inelastic Demand | Unitary Demand
1.Elastic Demand
Consider that you are a giant ice cream fan. Arre Just Imagine! Now imagine that the cost increases a little bit. You should reconsider and put your money in savings instead. That is what we mean when we talk about elastic demand; even small price changes cause significant changes in how much consumers buy.
2.Inelastic Demand
Now, consider items you cannot live without, such as your favourite snacks. You will continue to purchase them even if the price increases because they are necessary for you. That is inelastic demand, where price changes have little effect on how much you buy.
Consider the price of petrol for your family’s automobile as an example. Your family still needs to purchase petrol to travel. Thus, you will do so even if the price increases.
3.Unitary Demand
Consider this to be a delicate balance. You’ll buy a little less if the price goes up a little. You’ll buy more if the price reduces. Everything eventually balances out, and the overall amount spent stays relatively constant. That is unitary demand.
Let’s imagine the cost of your preferred beverage increases a little bit, such as 10%. If you want to keep your spending about the same, you might choose to buy a little less, that is by 10%, but not significantly less.
Here, Percentage Change in Quantity Demanded is = Percentage Change in Price
Different Types of Elasticity
1.Perfectly Elastic Demand
Imagine having a magical wand that causes consumers to stop purchasing immediately when the cost rises. That is a beautiful example of elastic demand when everyone refrains from buying at the first sign of a slight price increase.
Consider the following scenario: You are at a market when suddenly, the cost of a branded smartwatch doubles. You can conclude it’s not worth purchasing and start looking for alternatives.
2.Perfectly Inelastic demand
Let’s now consider issues of the utmost importance, such as medicine. You will continue to purchase the same quantity regardless of price changes because you are compelled to do so. Nothing prevents you from purchasing; thus, that is a perfect example of inelastic demand.
Consider Wheat, which is an essential part of your diet. You will continue to purchase it even if the price increases since it is necessary for your well-being.
3.Highly Elastic Demand
Consider activities you like but could live without, such as video games. You might decide it’s not worth the expense and forgo it if the price increases slightly. That’s highly elastic demand; little price increases have a significant impact on how much you buy.
Let’s imagine that the cost of a movie ticket increases somewhat. This time, you can opt to miss the movie in favour of a better offer or a title you’re really looking forward to.
4.Highly Inelastic Demand
Think about a unique item with few alternatives, such as limited-edition shoes. There is nothing like it, so even if the price goes up, you will buy it. There isn’t much that can stop you from buying, which indicates that the demand is relatively inelastic.
Consider a concert ticket for your preferred band as a concrete example. You’ll still want to go even if the price increases because it’s a unique opportunity for you that you won’t want to pass up.
5.Unitary Elasticity
Think of a seesaw with a price at one end and your desired purchase amount at the other. When one end is pressed down, the opposite side also rises by the same percent, keeping the balance. That is unitary elasticity, where price changes and purchase changes occur simultaneously.
6.Cross-price Elasticity: Substitutes in Action
Cross-price elasticity is your technique for determining how much the price of one object affects the demand for another. It’s similar to figuring out whether two things are best friends for life or just loosely connected.
Use smartphones and tablets as an example in real life. Some consumers might choose tablets over smartphones if the price of smartphones rises because they provide comparable functionality and can serve as a replacement.
Substitutes vs. Complements
Things that complement one another include pairings like peanut butter and jelly. People might purchase less of the other if the price of one increases. On the other hand, substitutes are fallback alternatives; if the cost of one thing increases, consumers may choose something else that is similar in place of it.
Take the example of a Shirt & T-shirt; if the price of a T-shirt rises, then the demand for Shirts rises because they are substitutes for each other.
Normal Goods: More Goods in Good Times
When people have more money, they frequently want to purchase fancier goods, such as holidays or fancy vehicles. As a result, when someone’s increase, the demand for these common items increases.
Imagine that you have started to earn money from a part-time job. You may choose to set aside money for a particular tour, such as an enjoyable vacation with friends.
Inferior Goods
But other items, like instant noodles, aren’t really that great. People might decide not to purchase them as their salaries rise. As a result, when incomes grow, the demand for these subpar commodities declines. You may choose other better options, such as Atta noodles.
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If you found these examples interesting, then you can imagine how Exceptional the experience would be to learn in the classes at Art of Learnings classes by Vivek Sir.
At Art of Learnings – the top institute in Delhi , India- AOL Economics Course support young minds with the tools they need to understand the fundamentals of Economics, Business Studies, CUET and Social Studies. It is the best economics coaching institute because it has continuously set benchmarks with outstanding outcomes in CBSE boards under the direction of Mr. Vivek Sehgal. Our goal is to help you develop an awareness of these topics so that you can leave the classroom with knowledge that will help you make wise decisions in a changing world. Your potential to succeed responds to changing conditions much like demand elasticity does. Join us at AOL Economics because here is where your path to academic achievement begins.
Also read Difference between Macro & Microeconomics
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