Elasticity

        When I was a child, I always follow my parent go hypermarket buy daily necessities, and I always heard them complaining saying that “the item there are getting more expensive such as the apple a day cost rm1.50 and the following it has increased to rm2.00 .”

     

           From the diagram above, is proven that the owner offers variety of discount has successfully attracts people tend to buy it. For example, there is this shirt sold as rm260 last week but now it is has discounted to rm150, therefore this shows that if the price of the shirt decrease, the demand of people buying will increase.

      Income elasticity is based on how consumer's demand for different goods increases or decreases in response to a change in the consumer's income. For example, new handbag such as Louis Vuitton, Hermes, Burberry and etc. 

    

           Bag industries retailers may be interested in how the quantity demanded for new bags in a specific area is changing. In a case like this, we can look at consumer's income. If the area is growing, and incomes are increasing, we can assume that more new cars will be demanded. On the other hand, if incomes are decreasing, we can anticipate that more people would buy secondhand.

Reference:

1. http://www.econport.org/content/handbook/Elasticity/Income-Elasticity.html

     

2. http://www.tutor2u.net/blog/index.php/business-studies/comments/a-good-example-of-price-elasticity-of-demand

By Liew Pau Yee 0314681