Elasticity Paper

Elasticity Paper

Team A: Amanda Eakins, Calvin Burns, Deisy Aguirre, Feather Reynolds, Kathryne Edwards, Mark Kalmar

ECO/365

January 26, 2015

Kalamogo Coulibaly

Elasticity Paper

        The market price plays a role in why consumers would substitute a good as well as make a good a complement. Substitute goods are goods that can be interchanged because of limitations of supply or price. (Colander, 2013)  Complement goods are a bit trickier; it is the relation of one good to the use of another good.  A product can be substituted for a similar product if the original product is higher in price or out of stock.  A product will be bought at regular price because its complement is less expensive.  

Examples

Substitute goods

A new trend of living a healthier lifestyle through the consumption of smoothies and green drinks continue to takes a lead in the 21st century.  Frozen fruits can easily top the list as a great substitute for fresh fruits.  It is more expensive to purchase fresh fruits, especially when not in season, so frozen fruits will make a good substitute because of price.

Complement goods

Road trips are an exciting weekend endeavor, but the price is not always so exciting!  If tires are marked down, however, it will be much easier to fill the gas tank and take a trip.  Even if gas is not marked down, being able to buy tires at a discount increases sales in tires, as well as gasoline.

Reasons for Substitute Goods

        There are two reasons for substitute goods. It can be monetary because a similar product is less expensive than the original product either due to inflation or an increase in the price of the original product. It also can be due to the availability of the original product, which forces the consumer to try another product. On a global scale a substitute product might occur because of issues with shipping or delays in government tariffs which make it hard for the product to be imported or exported to another region. (Oz-Vitez, 2015)