Essay Writing Help on Elasticity Paper

Elasticity Paper

A product is termed as a substitute if it can be utilized as an alternative for another product. Having one product compels consumers demand less of the alternate product. Consumers go for substitute goods because they serve the same purpose as their preferred brands while low supply of one product create a high demand for the other. Examples of substitute products include coffee and tea, and cars and bikes. Substitute products have an advantageous cross elasticity of demand. This implies that if coffee’s price goes up while everything else is kept constant, then the demand for tea goes up, as consumers will go for the cheaper product. If sellers opt to reduce the price, the demand for tea will also fall as consumers resume to their preferred product in the substitution effect. Price is the principle factor that compels consumers to pick substitute goods instead of their preferred goods.

Conversely, complementary products are commodities whose uses are linked to the use of other products. Examples of complementary products include computer hardware and software, as well as printers and cartridges. Hot dogs are complementary to hot dog buns. The demand for complementary goods creates demand for their associated products. Although the price of cartridges may not rise, when the demand for printers goes up due to fall in price, the demand for cartridges will also rise. Cross-elasticity of demand for complementary products is negative. This means that the demand for a complementary good goes up when the price of its associated good is reduced. On the contrary, the demand for computer software will fall when the price of computer hardware goes up. The prices of complementary products are likely to change if there will be a change in demand.