What Affects How People Buy Essential Goods?
When we talk about the elasticity of demand, we mean how much the amount people want to buy changes when prices go up or down. For essential goods—things we really need in our daily lives—this can change for a few reasons. Let’s take a closer look:
Need vs Want: Essential goods, like food and medicine, are things we need to survive. Because of this, even if prices go up, people usually keep buying them. For instance, if the price of bread goes higher, most people will still buy it because they need it. This is called inelastic demand, where a price increase doesn’t really change how much people buy.
Other Options: Another big reason is whether there are other choices available. If a product has a lot of alternatives, people might choose those if prices go up. However, for many essential goods, there aren't good substitutes. Take insulin for diabetes, for example; there are no substitutes. So, if the price increases, people will still need it, and demand stays the same.
Income Share: How much money we spend on an essential good is also important. If a product costs a small part of our budget, we probably won't change how much we buy when the price goes up. For example, salt is cheap, so if its price rises, it won’t change how much people use. But if housing costs go up a lot, people might look for cheaper places or make other changes.
Time Frame: Over time, people can change how they act. In the short run, something like gasoline may have inelastic demand. But over a longer time, if gas prices stay high, people might decide to use public transport instead. This shows that demand can change depending on how long we look at things.
Buying Patterns: Many essential goods are linked to our daily habits. For example, most families regularly buy milk. Even if the price goes up, they will likely keep buying about the same amount. This routine makes demand more inelastic.
In conclusion, how much people want to buy essential goods depends on whether we really need them, if there are other options, how much of our money we spend on them, the time we consider, and our shopping habits. Knowing these reasons helps us understand why some prices can go up without making people buy a lot less!
What Affects How People Buy Essential Goods?
When we talk about the elasticity of demand, we mean how much the amount people want to buy changes when prices go up or down. For essential goods—things we really need in our daily lives—this can change for a few reasons. Let’s take a closer look:
Need vs Want: Essential goods, like food and medicine, are things we need to survive. Because of this, even if prices go up, people usually keep buying them. For instance, if the price of bread goes higher, most people will still buy it because they need it. This is called inelastic demand, where a price increase doesn’t really change how much people buy.
Other Options: Another big reason is whether there are other choices available. If a product has a lot of alternatives, people might choose those if prices go up. However, for many essential goods, there aren't good substitutes. Take insulin for diabetes, for example; there are no substitutes. So, if the price increases, people will still need it, and demand stays the same.
Income Share: How much money we spend on an essential good is also important. If a product costs a small part of our budget, we probably won't change how much we buy when the price goes up. For example, salt is cheap, so if its price rises, it won’t change how much people use. But if housing costs go up a lot, people might look for cheaper places or make other changes.
Time Frame: Over time, people can change how they act. In the short run, something like gasoline may have inelastic demand. But over a longer time, if gas prices stay high, people might decide to use public transport instead. This shows that demand can change depending on how long we look at things.
Buying Patterns: Many essential goods are linked to our daily habits. For example, most families regularly buy milk. Even if the price goes up, they will likely keep buying about the same amount. This routine makes demand more inelastic.
In conclusion, how much people want to buy essential goods depends on whether we really need them, if there are other options, how much of our money we spend on them, the time we consider, and our shopping habits. Knowing these reasons helps us understand why some prices can go up without making people buy a lot less!