There are 4 factors that influence the price elasticity of demand: •The availabi
ID: 1250702 • Letter: T
Question
There are 4 factors that influence the price elasticity of demand:•The availability of substitutes
•The specific nature of the good
•The part of income spent on the good
•The time consumers have to buy the good
In a 2–4 paragraph Discussion Board post, discuss the following:
•Choose a product you have purchased in the past month from a clothing or shoe store.
•Describe how each of the 4 factors contributed to the elasticity of the good.
•Is the product considered elastic, inelastic, or unitary elastic?
•In a few sentences, what effect does the current supply and current demand have on this product?
Explanation / Answer
Consider a pair of Air Jordan basketball shoes: There are many substitutes available in terms of basketball shoes, in many different price ranges, styles, and functionalities. The nature of the good is strictly private, it is excludable and also rivalrous. Thus, once I purchase the pair of shoes and wear them no one else can wear them and at the same time I can keep others from wearing them. Next, while shoes are necessary, a pair of Air Jordans are a luxury item (as there are much cheaper alternatives) thus much of the purchase will be made with disposable income. Again, while shoes are necessary it is unlikely that someone buying a pair of Air Jordans will need these shoes right away (as it is most likely that they already have a pair) thus there is a time frame in which the consumer could shop around, wait for a better price, or decide not to buy the product altogether. Due to the aforementioned qualities of the product it is likely that this product is an elastic good. Luxury items usually have higher income elasticity because when people have a higher income, they don't have to forfeit as much to buy these luxury items. Likewise the high demand and prestige of these shoes inflates the price, yet because of the cheap costs of production the supplier is able to meet demand while maintaining a price that will clear the market.
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