Elasticity 1

Elasticity: Inelastic, Elastic, Perfect Elastic, Perfect Inelastic, Unitary Elastic

Michelle L Johnson

Herzing University

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Section 1: Application

Elasticity: Inelastic, Elastic, Perfect Elastic, Perfect Inelastic, Unitary Elastic

When we look at elasticity some of us had no clue what it meant. As you read through

our book it explained many different views and types. Elasticity is basically being flexible; you

are able to return the item/person to a normal state. Through this short essay you will see that we

will discuss five products and what type of elasticity they are. These five products are gasoline,

hamburger, sugar, drugs, and juice.

A great example of an inelastic good is gasoline. This is a product that people will buy

no matter if the price goes up or not. You have to have the supply of gasoline to get to and from

work but you may cut down on driving aimlessly around town because the price of gas has gone

up. As far as a substitute, there really are a few out there but they cost so much more that people

overlook the option. If there was ever a shortage I still think a lot of people would be driving

still because they think that is the only way to get around.

Elastic on the other hand would be something when the product has a substation or a

price limit. An example would be hamburgers. When we go to McDonald’s we know that we

can always get a hamburger but there are other substitutions besides eating a hamburger. If we

were to lose our job we would not go to McDonald’s and it could be something a lot of people

give up if there was a huge shortage of the product.

Next is a perfect elastic good. A good example of this is sugar. You can purchase many

different types but we are going to talk about cane sugar. This is when the package you are

viewing says the same thing as the other package from a different company, but the only

difference is the price per each package. Although sugar is a product many use to cook and bake

I believe it is something many can go without or even use a sugar substitute. It’s definitely

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something many chose to use because it’s convenient but there are many other ways to sweeten

whatever you are making.

As far as perfect inelastic goods I am going to use drugs as an example. Some citizens

have to have certain drugs to live because of an illness or disease. So in order for them to

continuing living and enjoy life they have to take this drug on a daily basis, which means they

will pay the price no matter what. If there was ever a shortage of a drug it would be a big

situation. Some might have to go to the doctor to get a different drug although it may not work

as well. Even if I were to lose my job, my medication would definitely be on my priority list

only because that is the way I have to live to stay alive.

Unitary elastic would be a product where if the price goes up barely anyone buys it. An

example of this would be juice. If juice prices goes up I would encourage my kids to drink more

water or milk. If no one ends up buying the juice the price ends up going up because it is not

getting any income for the company. If there were a shortage no one would really care because

of the price being so high. Same as if people were to lose their jobs it would be a “treat” to buy a

bottle of juice to drink.

Section 2: Comprehensive

Unitary Elastic: This is when you have a situation where there is a change and it causes some

type of a change in another way. Anything could really be an example but I will use ice cream.

If the price of ice cream were to increase the demand would go down because people are willing

to pass it by.

Perfect Elastic: This is when there is a demand or supply change and the curve is usually

horizontal. A good example would be money. People know the value of money so if someone

tried to tell them they needs to pay more than the value they would not use it anymore.

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Income Elasticity of Demand: Basically, measures the demand of a product to the change of the

income of its consumers. An example would be people purchasing automobiles or even eating

out at restaurants.

Cross Elasticity of Demand: It measures the demand for a product so that the price can change

in another type of product. For me I drink a lot of tea so if the price goes up on tea I would

switch to drinking coffee because it satisfies me the same.

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References

McEachern, W. A. (2010). ECON Micro 2 (Book Only), 2nd Edition. Mason, OH: South-

Western Cengage Learning