Luxury goods, airline tickets, fast food, gasoline, OTT platforms, and furniture/home décor are examples of products that demonstrate elastic demand. Elastic demand refers to a situation where a change in price leads to a significant change in the quantity demanded by consumers. In other words, when the price of these goods fluctuates, consumers are more likely to adjust their purchasing behavior.
Key Facts
- Luxury Goods: Luxury goods, such as high-end clothing, jewelry, and designer handbags, are often considered examples of elastic demand. When the prices of these items increase, consumers may delay their purchase or look for more affordable alternatives.
- Airline Tickets: Airline tickets are another example of a product with elastic demand. When airfare increases, consumers may choose to postpone their travel plans or seek alternative means of transportation. Conversely, if airline companies lower their prices, there is usually a surge in ticket demand.
- Fast Food: Fast food is a discretionary expense that people can easily avoid if the price becomes too high. When the cost of fast food increases, consumers may choose to cook at home or opt for cheaper alternatives. On the other hand, when fast food prices fall, demand usually increases.
- Gasoline: Gasoline is a classic example of a product with elastic demand. When the price of gasoline increases, people may choose to carpool, take public transit, switch to a more fuel-efficient car, or reduce their overall driving. Conversely, if the price of gasoline drops, there is typically an increase in demand.
- OTT Platforms: Over-the-top (OTT) streaming services like Netflix, Amazon Prime, and others can also exhibit elastic demand. Viewers are susceptible to switching to another OTT platform if there is a price rise. Factors such as price changes and the availability of shows can influence consumers’ decisions to continue their subscriptions.
- Furniture and Home Décor: When people intend to buy furniture or home décor pieces, they tend to compare prices and quality across different showrooms. If there is a noticeable price increase compared to other alternatives, it can lead to a decrease in demand.
Luxury Goods
Luxury goods, such as high-end clothing, jewelry, and designer handbags, are often considered examples of elastic demand. When the prices of these items increase, consumers may delay their purchase or look for more affordable alternatives. The availability of substitutes and consumers’ willingness to forgo these luxury items in favor of cheaper options contribute to the elastic nature of demand for luxury goods.
Airline Tickets
Airline tickets are another example of a product with elastic demand. When airfare increases, consumers may choose to postpone their travel plans or seek alternative means of transportation. Conversely, if airline companies lower their prices, there is usually a surge in ticket demand. The availability of substitute modes of transportation, such as car travel or train journeys, gives consumers the flexibility to adjust their travel decisions based on price changes.
Fast Food
Fast food is a discretionary expense that people can easily avoid if the price becomes too high. When the cost of fast food increases, consumers may choose to cook at home or opt for cheaper alternatives. On the other hand, when fast food prices fall, demand usually increases as consumers find it more affordable and convenient. The availability of substitutes, such as home-cooked meals or other dining options, influences consumers’ responsiveness to changes in price.
Gasoline
Gasoline is a classic example of a product with elastic demand. When the price of gasoline increases, people may choose to carpool, take public transit, switch to a more fuel-efficient car, or reduce their overall driving. Conversely, if the price of gasoline drops, there is typically an increase in demand as consumers find it more economical to use their vehicles. The availability of alternative modes of transportation and the flexibility to adjust driving habits contribute to the elastic nature of gasoline demand.
OTT Platforms
Over-the-top (OTT) streaming services like Netflix, Amazon Prime, and others can also exhibit elastic demand. Viewers are susceptible to switching to another OTT platform if there is a price rise. Factors such as price changes and the availability of shows can influence consumers’ decisions to continue their subscriptions. The presence of multiple streaming platforms and the ease of switching between them contribute to the elastic demand for OTT services.
Furniture and Home Décor
When people intend to buy furniture or home décor pieces, they tend to compare prices and quality across different showrooms. If there is a noticeable price increase compared to other alternatives, it can lead to a decrease in demand. Consumers may choose to postpone their purchase, explore other retailers, or opt for more affordable options. The availability of substitute products and the ease of comparing prices contribute to the elastic demand for furniture and home décor items.
In conclusion, products with elastic demand are influenced by factors such as the availability of substitutes, consumers’ willingness to adjust their purchasing behavior, and the presence of competitive options in the market. Understanding the concept of elasticity helps businesses and policymakers make informed decisions regarding pricing and demand management strategies.
Sources:
- “6 Price Elasticity of Demand Examples” (https://www.symson.com/blog/6-price-elasticity-of-demand-examples)
- “Reading: Examples of Elastic and Inelastic Demand | Microeconomics” (https://courses.lumenlearning.com/suny-microeconomics/chapter/reading-examples-of-elastic-and-inelastic-demand/)
- “Elasticity vs. Inelasticity of Demand: What’s the Difference?” (https://www.investopedia.com/ask/answers/012915/what-difference-between-inelasticity-and-elasticity-demand.asp)
FAQs
What is elastic demand?
Elastic demand refers to a situation where a change in price leads to a significant change in the quantity demanded by consumers. In other words, when the price of a product fluctuates, consumers are highly responsive and adjust their purchasing behavior accordingly.
What factors contribute to elastic demand?
Several factors contribute to elastic demand for a product. These include the availability of substitutes, the proportion of the product’s cost in the consumer’s budget, the presence of competitive options, and the luxury or discretionary nature of the product.
Which products are examples of elastic demand?
Products that typically exhibit elastic demand include luxury goods, airline tickets, fast food, gasoline, over-the-top (OTT) streaming services, and furniture/home décor. These products are more likely to experience changes in demand when there are variations in their prices.
Why do luxury goods have elastic demand?
Luxury goods are considered to have elastic demand because consumers have the flexibility to delay or forgo their purchase when the prices of these items increase. The availability of substitutes and consumers’ willingness to opt for more affordable alternatives contribute to the elastic nature of demand for luxury goods.
How does price affect demand for airline tickets?
Airline tickets demonstrate elastic demand, meaning that changes in price have a significant impact on demand. When airfare increases, consumers may choose to postpone their travel plans or seek alternative means of transportation. Conversely, if airline companies lower their prices, there is usually a surge in ticket demand.
Why is fast food an example of a product with elastic demand?
Fast food is a discretionary expense, and consumers have the flexibility to avoid it if the price becomes too high. When the cost of fast food increases, consumers may choose to cook at home or opt for cheaper alternatives. Conversely, when fast food prices fall, demand usually increases as consumers find it more affordable and convenient.
What makes gasoline an example of a product with elastic demand?
Gasoline is a classic example of a product with elastic demand. When the price of gasoline increases, people may choose to carpool, take public transit, switch to a more fuel-efficient car, or reduce their overall driving. Conversely, if the price of gasoline drops, there is typically an increase in demand as consumers find it more economical to use their vehicles.
Why do over-the-top (OTT) platforms exhibit elastic demand?
OTT streaming services like Netflix and Amazon Prime can exhibit elastic demand. Viewers are susceptible to switching to another OTT platform if there is a price rise. Factors such as price changes and the availability of shows can influence consumers’ decisions to continue their subscriptions. The presence of multiple streaming platforms and the ease of switching between them contribute to the elastic demand for OTT services.