# Inelastic Goods - Explained

What are Inelastic Goods?

# What are Inelastic Goods?

Inelastic in economics is a term used to define the unchanging status of a customers buying habit even after changes in price. Simply put, it refers to a situation where an increase in price of commodities doesnt affect a consumers demand, and a decrease in the price of a product still doesnt affect a consumers demand.

# How to determine whether a Good is Inelastic?

When set in percentage terms, the word inelastic simply means that 1% change in the price of goods and services doesnt amount to 1% change in the quantity demanded of such commodities. Subsequently, it doesnt lead to a 1% increase in supply too, as there is no additional demand. For instance, assume that the price of a spare Yamaha tyre increased to \$300 per unit from \$250. Basically, we can say that this is a 20% increase from the previous price. However, if the demand for Yamaha tires dropped from just 3000 units to 2700 units, then itd be equivalently to a 10% decrease in demand, which is not up to the 20% increase in price. If a situation like this were to occur, then we can call those tires inelastic goods. In a case where the 20% increase in price doesnt change demand (that is demand stays at 3000 units regardless of the additional \$50 price) then we say that these products are perfectly inelastic. In most cases, the need for a basic item tends to be inelastic while that of a luxury want tends to much more on the elastic side. Take for example food and clothes. If Adidas decides to up the price of one of their polos from \$50 to \$80, the chance of a lower demand for such a shirt would be high. This is because, most people buying those clothes already have enough to satisfy their clothing needs, with any additional unit of such clothings being a mere want or a means to satisfy their desires. Food on the other hand might be inelastic depending on which product type youre buying. If the cost of a can of water were to increase by \$.30, the effect on demand would be relatively low, as most people would still need to drink can water anyway. For a perfectly inelastic product, the demand curve is depicted as a vertical line in graphical presentations due to the steady demand at any price level. Supply can also be perfectly inelastic, just like seen in a work of art. Even if more customers are running around making ernomous offers, there can only be one of such a product, i.e. one original version of such art.

# Perfectly Inelastic Goods

It is rare to see a perfectly inelastic product. No one really exists, if not, most producers and manufacturers would be making trillions since they know that consumers would buy their products even if the prices went up to the skies. The only two perfectly inelastic goods are air and water, and gladly, it is not regulated by any body or association. However, some goods do happen to come close to being perfectly inelastic. For instance, gasoline is a product that has a fluctuating price. The major cause of price changes in gasoline is supply, and in a situation where supply drops, the cost of gasoline would increase. However, this doesnt stop people from buying it even at this high price. People need to drive their cars around, especially those that are used to it. While this might make it look like something that is perfectly inelastic, the truth is that it really isnt. This is because after a while, people would get used to taking the bus, some might even move closer to their workplace, and some might ration their gasoline by changing their lifestyle. This makes it inelastic and not perfectly inelastic. However, for the first few weeks of this price influx, most persons wont have a choice but to purchase gasoline before changing their lifestyle.