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Free Example of Understanding Product Elasticity Essay

Elastic products are those whose change in market price directly affects their demand. These products often have their substitutes. A change in the price of these substitutes affects their demand and price.  The inelastic products are those whose demands remains constant even with change in the economy or consumer demands (Blinder & Baumol, 2008).

Gasoline is a product in the energy industry. This product is highly elastic in most economies especially in the economies driven by fuel-related products. The consumers of this product are often significantly controlled by price fluctuations. The demand of this product is thus purely based on the change of its unit prices in the market. For example since this product is generally needed, as its prices plunge, the quantity purchased increases spontaneously.

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During economic recession, the demand for gasoline remains generally steady since it is a generally needed product. This implies that as prices sour, the elasticity of gasoline does not necessarily affect its demand (Blinder & Baumol, 2008). The customers are thus very loyal and its demand is greatly affected by state of the national economy. However, gasoline being a petroleum product can be both elastic and inelastic. Its elasticity plays out in industries where it has substitutes. For example there are engines that can use gasoline or diesel products. When prices gasoline in such economies shoot, consumers look for alternative petroleum products that can substitute it at fair prices.

Trading in gasoline is a lucrative business because many economies depend on it for various industrial and energy uses. Its elasticity makes it profitable in that one can review the prices upwards or downwards flexible to attract and retain product consumers. It is particularly more lucrative in the economies of non-oil producing countries. These economies have great potentials for trading in the elastic products. In recession seasons the product becomes even more lucrative.

Recession periods are therefore a breeding groan for elasticity trouble in the energy consumer industry. In conclusion, product elasticity in any given market is highly dependent on the existence of its substitutes in the same market and the dynamics of price fluctuations.

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