Clearly, the demand for physicians is inelastic as the demand elasticity in absolute magnitude is lower than 1. This may be explained on the importance of health in society. Even if the fee for physicians is increased, the customers would still continue to go as the patient’s health invariably is more important than money. Also, the availability of close alternatives for physicians is less especially in western countries where alternative treatment therapies are not popular (Nicholson & Snyder, 2011).
Clearly, the demand for foreign travel is elastic as the demand elasticity in absolute magnitude is significantly greater than 1. The explanation of this lies in the fact that foreign travel is a luxury good and hence susceptible to alterations in the price. Additionally, there is wide availability of alternatives also especially for casual travellers who may decide to go on trips to domestic locations instead of going abroad. Foreign travel is not a crucial element of a common man’s life and hence the demand is closely connected with the prices as the travellers want the best deals (Mankiw, 2014).
- for newspapers
Clearly, the demand for newspaper is highly inelastic as the demand elasticity in absolute magnitude is significantly lesser than 1. Two reasons that are responsible for the same are mentioned below (Krugman & Wells, 2013).
- The spending on newspaper is so miniscule as a % of total spending that even though the price may increase, in absolute terms the burden on the customer is minor only.
- Further, there is no close substitute of newspapers which provides news in a condensed form especially for the non-tech savvy generation.
Radio and Television Receivers
Clearly, the demand for radio and television receivers is elastic as the demand elasticity in absolute magnitude is greater than 1. This may be because of availability of alternatives such as mobiles, laptops which can be used for entertainment and watching television and listening to radio is possible through internet. This is especially the case for younger generation who is technology savvy (Nicholson & Snyder, 2011).
During the earlier time, due to lack of economic growth, people focused only on subsistence level of production which focused only on satiation of current needs and the concept of surplus was considered insignificant. But with the boom in the economic growth, the capacity to produce various goods and services has tremendously enhanced which in turn had led to abundant supply of various goods and services, But in the production of these abundant supply, one of key inputs is the human time and effort. Thus, a substantial amount of time goes into the production function and therefore it has dramatically reduced the time available for consumption of these goods (Samuelson & Marks, 2003). Thus, the given statement highlights the intrinsic trade off that is involved with regards to production time and time available for goods consumption
In order to take every decision with absolute rationality, it would be required to consider all possible aspects and alternatives, evaluate these using all possible data and thus make a choice. There would be a huge requirement of time in this process. However, the complete rationality process needs to critically analysed in the wake of the value of time. In order to achieve complete rationality, so much time is consumed that the small gains in terms of decision making may not be able to exceed the cost in terms of time spent. (Mankiw, 2014). Hence, in accordance with cost benefit analysis, limited rationality seems a more viable choice. Thus, pursuit for complete rationality is a self-defeating proposition in itself and must not be adhered to unless the gains outweigh the cost in terms of time and resources spent (Samuelson & Marks, 2003).
Krugman, P & Wells, G 2013, Microeconomics, 3rd eds. Worth Publishers, London
Mankiw, G 2014, Microeconomics, 6th eds., Worth Publishers, LondonNicholson, W & Snyder, C 2011, Fundamentals of Microeconomics, 11 th eds., Cengage Learning, New York
Pindyck, R & Rubinfeld, D 2001, Microeconomics, 5th eds., Prentice-Hall Publications, London
Samuelson, W & Marks, S 2003, Managerial Economics, 4th eds., Wiley Publications, New York