Sir Shannon Scott Williams
January 10th, 2010
Unit 2: Discussion Board
Microeconomics and Market Systems
The winter seasons’ temperature for south eastern United States changes more than today’s gasoline prices. One week it could be a steady 32 degrees Fahrenheit and the next week temperatures’ could rise to 45 degrees. With the new job I have, I sometimes have to work outside. Now, this week, the coldest so far for this season, I needed a winter jacket from the local hardware store.
At the time of shopping I noticed several different types of jackets: heavy duty ($150), light duty ($25), stylish ($125), and all-purpose ($50). There were plenty of options to choose from, and since this was a work-jacket, I didn’t need anything too fancy or expensive. Due to the upcoming cold predictions, I know that I absolutely needed a jacket to prepare for, so even if the sales attendants changed the prices on scene, I would still make a purchase. The jacket I chose was the all-purpose ($50).
Changing the prices of a product can affect revenues earnings. To determine this, economist use the price elasticity of demand, which measures the responsiveness of the quantity demanded to changes in prices (Krugan, Wells, 2009, p. 144). The elasticity is based on the availability of substitutes, the specific nature of the good, how much income is spent on the good, and the amount of time consumers have to buy the good. They classify the responsiveness to elastic if the changes in quantity demanded are greater than the changes in prices. Inelastic if changes in quantity demanded are less than the changes in prices. Unitary elastic if changes in quantity demanded equals the changes in prices, (QuickMBA.com, 2009).
Based on those factors, my jacket would be inelastic due to my spending wasn’t very much, the product is a necessity, there were many jackets to choose from, and I had all season long to purchase the jacket. During this current economy, demand wouldn’t change much because of the cold weather conditions and consumers are likely to purchase the good even if prices are changed. In addition, it is logical for businesses to change prices on products when there is a change in demand (eg. winter clothes, spring clothes).
Krugan, Wells. (2009). Economics (2nd Ed.).
Worth Publishers. AIU Online Version
Price elasticity of demand. (n.d.). Retrieved August 26, 2009, from QuickMBA Web site: http://www.quickmba.com/econ/micro/elas/ped.shtml
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