Topic 5: Ripple Effects and Elasticity

Elasticity greatly depends on the product itself. If it's essential, it would probably have a low elasticity. If it's not essential and it's mainly recreational or additional, it would probably have a high elasticity. The higher the elasticity, the higher percentage change of quantity demanded would occur with each percentage change of price. The ripple effect, as I see it, is kind of like collateral damage, only it doesn't have to be damage. It is a side effect that came along with doing something. Oil is probably the one good that has the most ripple effects. It affects car prices and transportation in general, tires, asphalt, and other things that are made with oil. The rising oil price might affect our lifestyle in that we would drive less often and rely more on public transportation or walking. Also, I am almost 18 and I might be buying a car after college, if cost of many components of an automobile is related to oil than price of a car might rise significantly. The rise in oil doesn't just affect transportation, a lot of other products, good, and services all require oil. Because oil is such an essential resource for the production and utilization of other goods you might own or use, it creates a chain effect that might increase the price of some goods and services and decrease the price of some other goods and services. Another essential product is water. If the price of water rise significantly, baths would be taken less often, maybe people would drink less soup because it might spike up the production cost of soup. Another example is salt. Salt is used in daily culinary tasks and a rise in price of salt could definitively increase the price of many restaurants and food in general. Some products, like Iphones, have close substitutes like the Galaxy S III phone made by Samsung. Because of a close substitute, the elasticity is really high. This is because an increase in price in Iphone might cause a lot of people to not buy Iphone and instead buy the Samsung phone.