What are some real-world examples of elasticity in economics?

What are some real-world examples of elasticity in economics?

Elasticity in economics measures how much demand or supply changes in response to price changes. A classic example is the demand for luxury goods; when prices rise, demand often drops significantly.

Can you give me a specific example of a luxury good?

Sure! A good example is designer handbags. If the price of a popular brand like Louis Vuitton increases, many consumers may choose to buy less or switch to a different brand.

What about necessities? Are they elastic too?

Necessities tend to be inelastic, meaning demand doesn't change much with price changes. For instance, even if the price of bread rises, people still need to buy it.

How does this relate to the concept of supply?

Supply elasticity refers to how much the quantity supplied changes in response to price changes. For example, if the price of a product rises, suppliers may produce more if they can do so easily.