Elasticity of Demand

• Elasticity of demand is a measure of the responsiveness of people to change in economics variables.

There are many elastic demand and inelastic demand created by marketer. For examples, luxury goods, car and  building are elastic goods. Elastic demand means the changes of price is smaller than the changes of the quantity demanded. That is because those are not necessary goods and people are not really use in their daily life, and when the price change will give impact to the quantity demanded. Furthermore, elasticity of demand will be influenced by level of income, habit, time period and price product itself. For instance, people have lower income they will cut their hair at normal saloon for only RM5 but will not cut their hair at high-class saloon.







To explain the graph, when the price of   gold increase, people will not buy it. when the price of gold fall, people will buy more and more. 

Let us talk about the two types of substitute products: Gardenia bread and Massimo bread. These products are under necessary goods for human and necessary goods are under inelastic demand. But consumers will consider buy the lower price one, because taste of bread between the Gardenia and Massimo are almost same. Moreover, when the price of Gardenia bread increase people will tend to buy Massimo bread, whereas when the price of Massimo bread increase, people will buy the Gardenia bread instead the Massimo bread.

To best describe the situation, when the price of Gardenia bread increase, consumers will buy  Massimo bread instead Gardenia bread as the price for Massimo is lower.