One of my favorite economics blogsites is written by Harvard economist Greg Mankiw, who served as Chair of the Council of Economic Advisors under President George W. Bush and is the author of the top selling principles of economics textbook. He provides a number of interesting (an in at least one case, somewhat provocative) real world examples of demand elasticities; e.g., see the following postings:
The Cross-Price Elasticity of Demand
- In a series of postings dated from May 2008 – September 2008, Professor Mankiw provides example after example of the impact that high energy prices were having at the time in terms of influencing all sorts of energy-related consumer decisions; e.g., methods and modes of transportation, home buying practices, and the demand for online courses.
The Income Elasticity of Demand
- Why are we spending more on healthcare (September 3, 2009) – The short answer, according to Nobel laureate Robert Fogel, is that “…the long-term income elasticity of the demand for healthcare is 1.6—for every 1 percent increase in a family’s income, the family wants to increase its expenditures on healthcare by 1.6 percent.”
- Income Elasticity of Mistress Demand (November 25, 2008) – “You know times are tough when the rich start cutting costs on their mistresses. According to a new survey by Prince & Assoc., more than 80% of multimillionaires who had extra-marital lovers planned to cut back on their gifts and allowances. Still, only 12% of the multimillionaire cheaters said they plan to give up on their lovers altogether for financial reasons.”
- Inferior Goods (November 15, 2008) – Inferior goods have negative income elasticities, which implies that the quantity demanded moves in an opposite direction from consumer incomes. According to this posting from last fall, sales for products such as Spam, pancake mixes, instant potatoes, rice and beans have been booming during the recession; a spokesperson from a grocery chain is quoted as saying “They’re real belly fillers.”