Elasticity in our world(by Isaac Ho 5X)

During the current economic recession, many consumers are looking to buy cheaper goods and services whenever they can. It is not difficult to understand since retrenchment is high and employment rates are low. Economics is part of our daily lives and it can be seen anywhere and everywhere. Elasticity is one of the topics under economics that I am going to elaborate on.
Elasticity is a measure of the price responsiveness of the quantity demanded and quantity supplied. Three forms of elasticity include price elasticity, cross elasticity and income elasticity. Goods can either be elastic or inelastic. Elastic goods show an increase in quantity demanded when the price falls and decrease in quantity demanded when price rises while inelastic goods show no change in quantity demanded whether or not the price of these goods increases or decreases.
Kobe beef is a good example of elastic goods as most people know about it and it is popular amongst most people. The lower the price of Kobe beef, the higher the percentage of quantity demanded by consumers of Kobe beef. However, when the price of Kobe beef increases, the percentage of quantity demanded of Kobe beef decreases. The inversely proportional relationship between price and quantity demanded illustrates price elasticity. Substitutes for beef such as chicken can also affect the percentage of quantity demanded. If chicken becomes cheaper, the percentage of quantity demanded of Kobe beef decreases – thus showing cross elasticity. Income of consumers is another factor which determines the percentage of quantity of demand of Kobe beef. In good times, employers are able to pay higher wages to their employees. They now have the ability to purchase Kobe beef as it is more within the means of these consumers. Income elasticity of demand can be seen in this situation. Thus, Kobe beef can be considered a luxury good as people do not need to rely on it to survive.
Petrol is a magnificent example of inelastic goods. It is something that consumers need in order to power their vehicles. For example, the price of petrol drops. Many consumers will rush to buy petrol. However, they cannot fill up their vehicle petrol tanks more than the maximum capacity. When the price of petrol increases, people still need to purchase petrol as it is a necessity - even though some consumers may switch to taking public transport. They also cannot fill up beyond the capacity of their petrol tanks. Thus, price changes do not alter the percentage of quantity demanded of petrol because consumers depend on it to drive their lifestyles and it is a vital part of our everyday lives nowadays.
The percentage of income a consumer receives from his/her employer determines the ability of the consumer to purchase a good he/she desires. The higher paid the consumer is, the better his/her ability to buy that particular good. It does not help that the consumer is willing to buy the good but is not able to do so.
The price of substitutes is a factor affecting the percentage of quantity demanded of a good or service. In the case of meat such as Kobe beef, there are various substitutes ranging from chicken to fish, pork, etc. The percentage in quantity demanded is inversely proportional to the price of these goods i.e. the increase in percentage of quantity demanded is due to the fall in price of the good and the decrease in percentage of quantity demanded is due to a rise in price of the same good.
The concept of elasticity is crucial in Economics as it is linked to demand and supply. It greatly helps suppliers determine their ability to supply goods and services as well as helping consumers’ to determine their ability to purchase a given good or service in a given time period. The government is also able to determine how much GST is charged on a certain good or service. This allows them to increase their profits or more importantly, judge how many consumers will buy the good and utilize the service. Economic concepts can be seen all around us if we are observant enough to notice these concepts. So take a good look and see what the world has to offer!