Bus 1103 Microeconomics Unit 3 Discussion Post

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BUS 1103 Microeconomics Unit 3 Discussion Post Listen to (or read the transcript of) this podcast (Federal Reserve Bank of St. Louis. (n.d.). Elasticity of demand - The Economic Lowdown Podcast Series, episode 16 . https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-16-elasticity-of- demand ) from the Federal Reserve Bank of St. Louis. In your own words, describe your experience with price elasticity as a consumer. Provide an example of an inelastic good and an elastic good for your household. What makes those goods elastic or inelastic? How might other households respond differently? OpenStax College (2016) defines elasticity as “…an economics concept that measures responsiveness of one variable to changes in another variable” (p.106). As a consumer, the idea of whether a product is elastic or inelastic doesn’t pop into my head often; however, the economic premise behind elasticity is a theory that resonates most days of the week. All goods and services can be measured by their elasticity level; if they’re elastic or inelastic. Groceries, vacations, and subscriptions are just a few examples of goods and services that are common in every household, and our decisions to purchase them are subject to their overall elasticity level. Personally, in my household, I would consider milk to be an inelastic good. A good can be classified as inelastic if the percentage difference of quantity demanded is less than the percentage difference of a change in price (Federal Reserve Bank of St. Louis, n.d.) Therefore, even if the price of all types of milk (1%, 2%, skim, and whole) increased by $1 per gallon, we would still purchase the milk at the normal rate we currently do. Essentially, our quantity demanded would remain the same due to our necessity to purchase milk. Considering the factors that influence elasticity, Milk still proves, in my family’s opinion, to be inelastic. In relation to our household income, the price of milk is a very small percentage and doesn’t strain our budget. Additionally, we consider milk to be a necessity rather than a luxury. For us, it’s far easier to purchase milk than to invest in a cow and obtain the milk ourselves, so I can honestly say we’d stick with buying milk for the long run. Milk does have substitutes like almond milk and soy milk; however, our family prefers the dairy product over the substitutes. Other households may be more flexible with the idea of soy or almond milk over dairy if the price of milk increased significantly. Moreover, some families with land and livestock may choose to acquire a cow or two for obtaining milk in the long run. Regarding an elastic good or service, I would qualify going out to eat at a restaurant as elastic. If the price of foods within restaurants increased, we’d likely go out less often as we can cook from home. Furthermore, depending on where we dine out, the cost represents a much larger portion of our household income in relation to the average cost of cooking dinner in our home. Additionally, dining out can easily be considered a luxury over a necessity. Other households may respond differently if their household income is far higher as dining out might be considered a minuscule cost in relation to their income. Personal schedules could also play a huge factor in the personal elasticity of dining out for some. Some people may not have time to cook for themselves and therefore may pick up take-out at a nearby restaurant in lieu of preparing a home-cooked meal. References:

Federal Reserve Bank of St. Louis. (n.d.) Elasticity of Demand - The Economic Lowdown Podcast Series, Episode 16. Retrieved from https://www.stlouisfed.org/education/economic-lowdown-podcast-series/ episode-16-elasticity-of-demand OpenStax College. (2016). Principles of economics. Retrieved from http://cnx.org/contents/69619d2b- 68f0-44b0-b074-a9b2bf90b2c6@11.330 Comment #1 Hi Thaar, I enjoyed reading your descriptions of elasticity, well done. What are some examples of inelastic goods or services that you engage with on a regular basis? Regards, Alan Comment #2 Hi Velarie, Excellent post. I believe the personal experience and examples shared were spot on. With regards to Ideal milk and Carnation milk, would you say Ideal milk has a positive or negative cross- price elasticity of demand? Looking forward to your response. Alan Comment #3 Hi Ekwulo, Aside from necessity versus luxury, what are some other factors that influence the elasticity of demand? Looking forward to your response. Thank you, Alan

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