Our economy at any level has been influenced by this action of financial planning, where, as we know, important fields such as science, technology, and of course, education, each one representing essential vertices that throughout our history have framed our precious evolution in all aspects and senses.
In this opportunity I want to talk a little bit about a very well known subject for all of us since it is an intrinsic part of our finances at a personal, business, institutional or governmental level: demand. We are all very attentive to this variable at the different levels mentioned above, as well as supply, but in this opportunity we will relate in a general way to the first one, analyzing it from two opposite sides, one elastic and the other rigid.
Perhaps we are used to hearing about the demand for certain products or services in a global way. In the previous issue we were able to express that in the economic field, demand is generally referred to as the quantity of goods and services that we can acquire at a given moment, taking into account the price set by the market or in some cases by the consumers themselves.
I think that you may have heard or even said it at some point when making a purchase of a certain product, we know that we make the greatest of our efforts in order to meet our main needs, and this is linked to the price of goods and services that we need or at least we believe that generate the greatest social welfare for us and our families.
Our incomes are our financial sources that we contrast with the products and services we expect to acquire, and according to their demand will generally be their price, although the price of some items and services can influence the demand for these goods or services, of these relationships is that I will be talking a little as a member of a society immersed in demanding any kind of goods and services.
Elastic vs. rigid demand
Elastic demand
At some time, and in many cases without realizing it, we have been part of the generation of these two aspects of demand, how many times has it not happened to us that we have acquired for some time a certain product or service and when the product or service varies in price we stop acquiring it, in short, we speak of elastic demand when the price phenomenon attributes a character of sensitivity to the demand for certain goods and services.
Continuing with the previous relationship, we must also take into account that since they are products that can be substituted by others to fulfill a certain function, their demand is affected by their value or price, since the consumer can consider them as substitutable products and which will be useful at a good price, generating an elastic demand, therefore, it can increase or decrease with the variation of their price.
Rigid or inelastic demand
If we now turn to the other extreme and go to the flank of rigid demand we get an opposite process, that is, where the demand for certain products and services are not affected by their value or price, for example, those products that are generally considered basic necessities such as some foods where we could include bread, rice, or products such as medicines, among others, or products such as medicines, among others, therefore, the variation of the price of these products does not affect their demand because at least remains constant or its variation is imperceptible or not significant, this demand could also be called inelastic and thus we would be focusing in a better way two poles or opposite ends of the world of finance.
It is always important to relate to the different aspects of our daily life, for this we have all the analysis or knowledge provided by science-technology-education, highlighting that its radius of action reaches all areas of our existence.
Until another opportunity my dear friends.
Sources of cover gif images
Note: The gif image was made using the PhotoScape application.
Bibliographic reference recommended
[1] Elasticity of Demand. Link.
[2] Price Elasticity of Demand. Link.