Inelastic Vs Managerial Economics

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The law of demand is an inverse relationship between price and quantity. The higher the price the less quantity, the lower the price the higher quantity. However, “how much less and how much more do we buy?” This is where the idea of inelastic and elastic of demand comes to play.
Elastic quantity measure “how sensitive quantity is demanded to a change in price”. When price goes up quantity decreases by a lot. When price goes down quantity increases by a lot. This means that elastic products have many substitutes or are a luxury. For example, when the price of blueberries is $2.99 and goes up to $5.99 I rather buy strawberries at a lower price of $2.99 because I can get more or equal the quantity of strawberries at a lesser price. Therefore, blueberries are elastic, they can easily be substitute by other berries. Another example, are luxury items such as a Michael Korse purse, this purses can be expensive. Therefore, I can buy similar purses at a lesser price. However, if a Michael Kors purse is on sale ½ off the price on a department …show more content…
If price goes up there is a bit of change in quantity. When price goes down the quantity demanded goes up by a little bit. For example, the use of electricity. If an electric company increase their price per kilowatt I may reduce the use of electricity by a little. However, since electricity is a necessity in my home and does not have many substitutes I cannot drastically reduce the consume of energy. Therefore, electricity is inelastic. Another example is gas prices, when prices go down revenue do not increase by a lot. When prices go up gas revenue do not decrease by a whole lot. People may buy a little bit less but not a whole lot less. Therefore, quantity is insensitive to the change of price. Products with inelastic demands have very few substitutes. When it comes to gasoline there is nothing else we can put in the car and it is also a

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