Terry Knight
GE273
Project Part I In today’s economy consumers are more careful with their purchases. With unemployment and cost of just about everything up and people’s incomes the only thing that isn’t increasing its quite understandable as to why they are. Consumers are not going to spend frivolously on items they don’t need or are considered luxuries. On the other hand though they will purchase items that are what they may consider necessities.
Let’s look at the items put before us here. Barns and Noble books have an estimated price elasticity of -4.00. I would consider this price to be elastic because books from Barns and Noble are mostly purchased for entertainment and pleasure. With today’s technology and books being available in so many different formats, such as audio books, the internet, kindles and electronic pads just to mention a few, Barns and Noble need a little elasticity in their price. Books now have many substitutes rather than just being in print and bound by two covers.
The next item for review is Coca-Cola. Coke has an estimated price elasticity of -1.22 and I would consider this price to be elastic. Coke is price elastic, not because it’s a luxury or people derive pleasure from consuming it, but because there are so many substitutes out on the market. Good competition in a free market place can help keep prices low.
Now let’s look at cigarettes and beer which have an estimated price elasticity of -.25 and -.23 respectfully. These items I would consider price inelastic because of their nature. Cigarettes are an addictive item that people get hooked. Not only do they become addicted to smoking but they become addicted to a particular brand as well. So although there may be plenty of substitutes out on the market, a smoker will prefer to smoke their particular brand no matter what the cost is. The same logic can be applied towards beer