Elastic and inelastic demand Mathematics & Economics Essay (Essay Sample)

Elastic and inelastic demand
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Elastic and inelastic demand
Elasticity of demand is used in decision-making processes in predicting changes in demand as a result of changes in some factors (Pettinger, 2019). Marginal analysis on the other hand is the use of managerial economics therefore important in decision-making processes. This paper will explore price elasticity of demand and marginal analysis. This paper will also explore the contrast the deontology and consequentialism approaches to ethics, and the importance of opportunity cost in decision-making process.
Question one
Gasoline is one of the products with inelastic demand. This means that any change in prices, there is little influence on demand. Price elasticity is used to measure the responsiveness to changes to other factors more so price. In the short-term, motor gasoline’s price elasticity stands between -0.02 to -0.04 (U.S. Energy Information Administration, 2014). It shows that a decrease in 25% to 50% for the price of gasoline will be increase automobile travel by about 1% (U.S. Energy Information Administration, 2014). Gasoline is an essential product that cannot be replaced easily in the world. It is consumed by over 90% of the motorists in the world (U.S. Energy Information Administration, 2014). This indicates that as the prices of gasoline change, there will be a minimal or no change in demand of the good as shown in the graph below.
Newspapers are said to have an elastic demand to changes in their prices. If there is an increase in price of one brand of newspaper say, Daily Express, people will switch to other newspapers that provide the same information like those of Daily Express (Pettinger, 2019). For instance, if the price of Daily Express in raised by 20%, its demand will fall by more than 50% which means that its price elastic demand is about -2.5. as shown in the graph below.