elastic or inelastic demand?

Question

what does it mean? would the demand for crude oil be relatively elastic or inelastic? why? why would the demand for crude oil be more elastic at some price ranges? thanks for the help!

Answer 1

A high price elasticity of demand ("elastic demand") means that a change in the commodity's price results in a significant change in the quantity of the commodity demanded. I.e. when the product's price rises, a lot less of the product is demanded (a lot less people want to buy it at the higher price) and when the product's price falls, a lot more of the product is demanded (many more people want to buy it at the lower price).

A low price elasticity of demand ("inelastic demand") means the opposite: When you change the product's price it will make very little or almost no difference to the quantity of the product demanded. People almost don't react to price changes, they still want to buy (almost) the same amount as before.

In which cases do people still want to buy (almost) the same amount even though the price rises significantly?
Well, when the product fulfills a need which cannot easily be fulfilled in a different way, i.e. when there are no substitutes for this product, or when substitutes are not easily available.

That's why the demand for crude oil would be relatively price inelastic. If the price for apples rises significantly, people might buy more pears instead; but if your car and perhaps other expensive machines require oil, and there is no train or other public transportation or whatever to get you to work, you will have no choice but to buy petrol/gas (and hence oil) even when it costs considerably more.

However, if the price of oil rose to a prohibitive level (so high that you couldn't afford it), or if it stayed quite high for a long time, it would begin to make sense to look for alternatives even if they required costly investments (like moving to a different place where there is public transport, developing/buying a solar-powered car or whatever, investing in a new machine that runs on something else than oil...). So I imagine the demand of crude oil would be more price elastic at extremely high price ranges at which the development of and investment in substitutes become economically feasible.

Answer 2

The demand for iPod is relatively elastic, which is why they unveil so many new models. Here is my reasoning for its elasticity or in-elasticity, Elastic Demand: Some things that affect the elastic demand is price, as a #1. But also advertising and promotion. In a competitive market, advertising is heavily funded, and apple has become very creative in their commercials and ads. Ipod is also on the forefront of popularity of most people, especially young people. In addition, the new iPod have internet access, and a slew of downloadable apps, other mp3 players can't do that (the closest thing to the ipod is maybe the Zune I think). Inelastic Demand: Inelastic demand is when a company can increase its prices and not necessarily lose demand. In my opinion, the inelatic demand of an ipod can be caused by how much apple trumps other companies. For example, let's say that apple decides to raise the prices of its new ipod model by 50$. Because of the many uses of an ipod (apps, internet, games) and how its highly socially acceptable and "cool", people would still buy it. Of course, people who buy it would not be happy , but there really isn't a close alternative. So, in a way, the demand would not dramatically fall with a dramatic increase in prices. Like I said earlier, the closest alternative or substitute isn't very close in the value that an ipod provides. So I guess in many ways the ipod is both elastic and inelastic. I hope this helps.

Answer 3

Elasticity Of Demand For Oil

Answer 4

Elastic - it fluctuates because of many different factors including price and availability.

"inelastic" - demand is almost always constant regardless of different factors.