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Elastic and Inelastic Product Demand

Eric Curtis

Southeastern Oklahoma State University

AVIA 5213: Aerospace Economics and Fiscal Control

Dr. Angie Anderson

15 Jun 2023
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Introduction

The elastic and inelastic demand of products are determined by the consumers’ reluctance

to purchase them as the price and demand curve changes. The elastic demand of a product or

service changes by a higher percentage when the price fluctuates. Elastic demand for a product is

reflected in the volume of sales as the price of each unit sold decreases. The opposite is true for

products of inelastic demand. The inelastic demand of a product will stay the same when

consumers buy the same quantity regardless of price.

Elastic Demand

One of the most common examples of elastic demand is real estate. US consumers are

extremely aware and sensitive to the real estate and housing markets when prices fluctuate. As

prices change due to the global and domestic economy, stock market, health (COVID-19),

politics, and more buyers are heavily affected. Interest rates dropped into the 2-4% margins

encouraging many new homeowners to make their first home purchases. However, since June of

last year home sales have dropped nearly 25% due to rising interest rates and new job

opportunities (Rothstein, 2023).

During COVID-19 vehicle manufacturers were desperate to sell vehicles after car sales

decreased. As people continued to lose their jobs there was hesitancy in purchasing new vehicles.

Therefore, the price of vehicles and the financing options changed dramatically. Cars were sold

with 0% interest; payment deferrals became available and additional incentives were offered to

customers.

Shoes and clothing are another example of elastic demand products. When the

unemployment rate in 2020 reached 13.0% the consumption of American goods and products

reduced dramatically for nonessential items (Edwards, et al., 2022). This led to J.C. Penny, J
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Crew, Pier 1, and a handful of other brands filing for bankruptcy due to a loss of customer

purchases.

Inelastic Demand

Three examples of products or resources with inelastic demand are food, tap water, Apple

iPhones, and iPads. Regardless of price, availability, or difficulty human beings will require food

to survive. Abraham Maslow was an American psychologist who created the Hierarchy of

Human Needs. At the very bottom of his Hierarchy of Needs pyramid, he determined that

psychological needs, such as water, food, and sleep were the most important concepts in the

quest for self-actualization (FAA, 2016). As the price of food increases due to inflation, fuel,

transport fees or other factors the demand for food will not change regardless of price.

Tap water is another essential commodity that is required by billions of people around the

world. Regardless of the change in price due to droughts, city sanitation charges, or other fees

tap water will be consumed and used as needed. Daily, Americans use almost 82 gallons of water

a day at home (EPA, 2023). Water in the average American household is used for brushing teeth,

cooking, cleaning, bathing, and more. It is an essential product that Americans, and humans

would pay for regardless of its price.

Apple has nearly a complete monopoly on smart devices. Corporations around the world,

utilize Apple products for their performance, specifications, and application usage. American

Airlines alone has purchased and is currently using more than 8,000 iPads for their pilots and

flight operations managers (Hughes, 2013). Since then, all US major airlines are purchasing and

using Apple products for their flight crews with ForeFlight as their predominant Apple-supported

application. If a technical error occurred on any Apple device US airlines could suffer hundreds,

if not thousands of lost flights due to delay (Kedmey, 2015). For this reason alone, US airlines
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have a high reliance staked in Apple products and would likely pay any price to continue using

Apple products.

Conclusion

The difference between elastic and inelastic products comes down to their relative

demand and the price paid for them. Product organizations that control a complete monopoly

over a market will force consumers to buy products regardless of price without affecting the

demand. Items that are a necessity and must be purchased for human survival are likely

controlled by inelastic demand.

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References

Edwards, R. E., Essien, L. E., & Daniel Levinstein, M. L. (2022, June 7). U.S. labor market

shows improvement in 2021, but the COVID-19 pandemic continues to weigh on the

economy: Monthly Labor Review: U.S. Bureau of Labor Statistics.

https://www.bls.gov/opub/mlr/2022/article/us-labor-market-shows-improvement-in-

2021-but-the-covid-19-pandemic-continues-to-weigh-on-the-economy.htm

FAA. (2016). Pilot’s Handbook of Aeronautical Knowledge. Federal Aviation Administration.

Retrieved March 25, 2022, from

https://www.faa.gov/regulations_policies/handbooks_manuals/aviation/phak/media/

pilot_handbook.pdf

Hughes, N. (2013, June 24). Apple’s iPad now in use in all American Airlines cockpits.

AppleInsider. https://appleinsider.com/articles/13/06/24/apples-ipad-now-in-use-in-all-

american-airlines-cockpits

Kedmey, D. (2015). ‘Several Dozen’ Flights Grounded Because of iPad Glitch. Time.Com,

N.PAG

Rothstein, R. (2023, June 15). Housing Market Predictions For 2023: When Will Home Prices

Be Affordable Again? Forbes Advisor. https://www.forbes.com/advisor/mortgages/real-

estate/housing-market-predictions/

US Environmental and Protection Agency. (2023, April 24). Statistics and Facts. US EPA.

https://www.epa.gov/watersense/statistics-and-facts

Vasigh, B., Fleming, K., Tacker, T. (2018).  Introduction to Air Transport Economics (3rd ed.)

New York, NY: Routledge Publishing Co.