What Is the Relationship Between Demand and Inelastic Productivity?
As mentioned above, there are many reasons that a marketable good can be defined as luxury goods or luxury services. However, as the market develops and grows, we are seeing more goods that are defined as luxury goods or luxury services. For instance, luxury goods usually have an extremely high elasticity of supply since they are so dependent on demand.
A product, service, or even a very good can be a luxury good, a necessity, or simply a comfort to an individual. However, when a good or service is purely a comfort or a luxury good, it tends to be much less elastic than a necessary good. This concept of elasticity is very useful in explaining the behavior of goods and services. For example, when someone has a dental emergency, she is not going to want to run out and purchase a toothpaste unless she absolutely needs to because a dentist is just a few steps away.
In the market, we tend to think of things as being inelastic, or in what economists would call a zero-sum game. If you have more of something, you pay more. However, if you have less of something, then you don’t pay as much. Since most of us live in a zero-sum society, luxury goods income elasticity is defined as buying more of something (more goods) to get less of something (less goods). Since there is always a surplus of basic commodities over their required quantities, this is true in all markets.
This means that demand and supply in the market must be inelastic or price elastic, in order for the economy to maintain its balance. In economics textbooks, the concept of elasticity is used to represent the degree of inelasticity in production. Elasticity is measured by a particular factor, called the elasticity of production. The higher the elasticity of production, the lower the demand for any good. If demand is too high, manufacturers find it difficult to keep their costs down to the level at which they can profitably sell their products and make a profit.
This is where the concept of luxury goods comes in. Luxury items tend to be relatively inelastic in nature. This means that their prices are somewhat set by what people actually need to buy. Therefore, the goods that are relatively inelastic in nature will tend to be bought by people who are affluent but do not necessarily need the items. The goods that are relatively inelastic will be bought by people who are relatively poor but need the item.
Because most luxury goods are relatively inelastic, producers would be wise to seek equilibrium by producing their goods on a fairly even scale. They could use the concept of elasticity to their advantage by producing large numbers of small units of the item that are all relatively inelastic in nature. By doing this, they would be able to produce enough items to satisfy the needs of their customers. They would then be able to sell these items at a profit.
One might argue that because there are some things that are relatively inelastic in nature, the concept of elasticity is not relevant. However, when the producers try to produce normal goods that are also relatively inelastic, they run into a problem. In the real world, there are goods that are both inelastic and in elastic. These include luxury items such as jewelry.
If you look back at history, you will see that goods such as jewelry and hot dog buns were highly inelastic or very inflexible. These products only became flexible when the demand for them was high enough and the supply was low enough. Nowadays, they are very much in demand. However, the high demand is still not near to being high enough in order to meet the supply.