The Elasticity Of T-Shirts: Unraveling The Mystery

is a t shirt elastic inelastic or unitary elastic

The elasticity of a good, which indicates the sensitivity of one variable in response to changes in another, is a fundamental concept in economics. Typically, a good is either elastic or inelastic relative to market changes. However, in some cases, a good can be unitary elastic, meaning that a change in one variable results in an equally proportional change in another. In this scenario, the percentage change in quantity demanded is exactly the same as the percentage change in price. This is distinct from elastic goods, which have a high responsiveness to price changes, and inelastic goods, which have a low responsiveness.

Characteristics Values
Definition A T-shirt is unitary elastic.
Description A term that describes a situation in which a change in one variable results in an equally proportional change in another variable.
Demand Any change in the price of a good leads to an equally proportional change in quantity demanded.
Demand Elasticity 1 (strictly speaking, elasticity equals -1 since the demand curve is downward-sloping; but in most cases, elasticity is calculated as an absolute value).
Supply Any change in the price of a good with unitary elastic supply results in an equally proportional change in quantity supplied.
Supply Elasticity 1 (the supply curve is upward-sloping; thus, the elasticity of unitary elastic supply is simply 1).

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Elastic demand is greater than 1

T-shirts can be considered unitary elastic goods, meaning that a change in price will result in an equal percentage change in demand. However, the demand for T-shirts can also be elastic or inelastic depending on the specific circumstances and the type of T-shirt.

Elastic demand is a concept in economics that measures how responsive the demand for a product is to changes in its price. When the price of a product increases, the demand for that product tends to decrease, and vice versa. The elasticity of demand is often measured as a value on a scale, with values greater than 1 indicating elastic demand, values less than 1 indicating inelastic demand, and a value of 1 indicating unitary elasticity.

When the price elasticity of demand is greater than 1, it means that a small increase in price leads to a relatively larger decrease in demand. This is because the product is relatively sensitive to price changes, and consumers may choose to purchase alternative products instead. For example, if a T-shirt retailer increases the price of their T-shirts by 10%, they may experience a 15% drop in sales as consumers may opt to purchase shirts from a different retailer or choose to buy a different product altogether. In this case, the demand for T-shirts is elastic, with a value greater than 1.

Elastic demand (greater than 1) can also occur when there are many substitutes for a product. In the case of T-shirts, consumers may have a wide range of options to choose from, including different brands, styles, and price points. If the price of one particular brand of T-shirt increases, consumers may switch to another brand that offers similar products at a lower price. This would result in elastic demand for that particular brand of T-shirts, as consumers are willing to switch to alternative options.

Additionally, the elasticity of demand for T-shirts can vary depending on the income level of consumers. For consumers with higher incomes, the demand for T-shirts may be more elastic since they are more willing to pay a higher price for the product. On the other hand, for consumers with lower incomes, a small increase in the price of T-shirts may lead to a significant decrease in demand, making the demand more inelastic.

In summary, while T-shirts are generally considered unitary elastic goods, the demand for T-shirts can also exhibit elastic or inelastic behaviour depending on various factors such as the availability of substitutes, consumer income levels, and the specific circumstances of the market.

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Inelastic demand is less than 1

The elasticity of a good or service refers to the responsiveness of demand for that good or service to changes in price. It is computed as the percentage change in quantity demanded divided by the percentage change in price. Elasticity can be described as elastic, unitary elastic, or inelastic.

Inelastic demand is when the computed elasticity is less than 1, indicating a low responsiveness to price changes. In other words, the percentage change in quantity demanded is less than the percentage change in price. This means that a change in price will result in a smaller percentage change in the quantity demanded. For example, a 10% increase in the price of a good with inelastic demand will result in a decrease in quantity demanded of less than 10%.

In the case of T-shirts, it is likely that demand is inelastic. This is because T-shirts are a necessity and there are no close substitutes. Therefore, even if the price of a T-shirt increases, consumers will continue to purchase them as they are a basic item of clothing.

To further illustrate the concept of inelastic demand, let's consider an example of a good with inelastic demand: motor oil. A consumer either needs motor oil for their vehicle or doesn't require it at all. Therefore, a change in the price of motor oil will have little to no effect on the demand. Consumers are unlikely to stock up on motor oil if its price decreases, and they will still need to purchase it even if the price increases.

In contrast, goods with elastic demand have a high responsiveness to price changes, with a computed elasticity greater than 1. This means that a small change in price will result in a larger percentage change in the quantity demanded. For instance, luxury goods or items with easily available substitutes typically have elastic demand. If the price of a luxury item increases, consumers may choose to purchase alternative, less expensive items instead.

It is important to note that the elasticity of demand can vary along a demand curve. As we move along the curve, the values for quantity and price change, which also alters the ratios of their percentage changes. Therefore, the elasticity of demand at different points on the curve may differ.

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Unitary elastic demand equals 1

Unitary elastic demand, also known as unit elastic demand, is a term used in economics to describe a situation where a change in one variable results in an equally proportional change in another variable. In this context, it indicates the responsiveness of demand to changes in the price of a good or service.

When demand is unitary elastic, the proportion of change in demand for goods and services is equal to the proportion of change in its price. In other words, the percentage change in demand is exactly the same as the percentage change in price. For example, a 10% increase in price will lead to a 10% decrease in the quantity demanded. This means that the elasticity of demand equals 1.

The concept of unitary elastic demand is important for businesses to understand as it can significantly impact their profitability. A substantial change in price will result in a substantial change in the quantity demanded, which can affect the company's revenue. For instance, if a company increases the price of a product with unitary elastic demand by 10%, the demand for that product will decrease by 10%, resulting in a 10% decline in the company's revenue.

Unitary elastic demand is quite flexible and follows the basic rule of demand and supply. However, it is rare to encounter unitary elastic goods in the market. In most cases, a good is either elastic or inelastic relative to market changes.

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Perfectly elastic demand

A T-shirt is likely to be unitary elastic—that is, the percentage change in quantity demanded is proportional to the percentage change in price. However, this article will focus on perfectly elastic demand.

While perfectly elastic demand is a rare occurrence and there are no real-life products that can be considered perfectly elastic, it is still beneficial to understand this concept for economic analysis. Examples of products that may be considered perfectly elastic include luxury items such as jewels, gold, and high-end cars. These items can easily be substituted, and a slight increase in price will cause the demand to drop.

The formula for calculating perfectly elastic demand is:

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

It's important to note that the elasticity of demand can vary from product to product and market to market. Factors that affect the elasticity of demand include the availability of substitutes, the necessity of the product, and time. For example, during the COVID-19 pandemic, the demand for personal transportation vehicles like bikes and cars increased, even though there was no change in price. This unexpected increase in demand can be attributed to people's preference for personal transportation over public transportation due to safety concerns.

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Perfectly inelastic demand

T-shirts can be considered unitary elastic goods, as small changes in price will result in relatively proportionate changes in demand. However, the concept of perfectly inelastic demand is worth exploring further.

For perfectly inelastic goods, consumers have no substitute goods to meet their demands. An example of this could be insulin for a person with kidney failure. If the price of insulin increases, the patient cannot reduce their consumption, as it is essential for their survival. Similarly, if the price decreases, the patient cannot stock up and save it for future use, as their required quantity is predetermined by their medical needs.

Another example of a good that is close to perfectly inelastic is gasoline. Regardless of price fluctuations, people will still need to fill up their tanks to commute to work. However, it is important to note that perfectly inelastic demand is a theoretical concept, and in reality, demand for goods like gasoline may be highly inelastic but not perfectly so.

In conclusion, perfectly inelastic demand is a theoretical concept where demand remains unchanged despite price fluctuations. While rare in reality, it highlights the importance of certain goods and services that consumers cannot do without, regardless of their ability to pay.

Frequently asked questions

Elasticity is a term used in economics to describe the property of responsiveness in variables. It is used to assess the demand or supply of a good in response to changes in the price of that good or the income of consumers.

The three main categories of elasticity are elastic, inelastic, and unitary.

The formula for computing elasticity of demand is:

> (Q1 – Q2) / (Q1 + Q2) x (P1 – P2) / (P1 + P2)

where Q1 and Q2 are the initial and final quantities demanded, and P1 and P2 are the initial and final prices.

A good is considered elastic when the computed elasticity is greater than 1, indicating a high responsiveness to changes in price. In other words, a small change in price leads to a large change in the quantity demanded.

Unitary elasticity indicates proportional responsiveness of demand or supply. In other words, the percentage change in demand or supply is equal to the percentage change in price, and the elasticity equals 1.

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