{"id":21065,"date":"2025-05-14T09:27:44","date_gmt":"2025-05-14T07:27:44","guid":{"rendered":"https:\/\/creandgroup.com\/opinion-article\/lelasticitat-ciencia-de-laccio-humana\/"},"modified":"2025-05-14T09:31:24","modified_gmt":"2025-05-14T07:31:24","slug":"elasticity-the-science-of-human-action","status":"publish","type":"opinion-article","link":"https:\/\/creandgroup.com\/en\/opinion-article\/elasticity-the-science-of-human-action\/","title":{"rendered":"Elasticity: the science of human action."},"content":{"rendered":"\n

When we talk about elasticity in microeconomics, we\u2019re not referring to the ability to do the splits in a Pilates class. No. In this context, elasticity refers to how much one variable (for example, the quantity demanded of a good) changes when something else changes\u2014such as its price, the consumer\u2019s income or the price of a related product. In other words, it is a measure of the sensitivity\u2014sometimes the hypersensitivity\u2014of economic agents to certain stimuli.<\/p>\n\n\n\n

The best-known form is price elasticity of demand. This marvellous metric tells us how much the quantity demanded of a good changes when its price changes. If the price of potatoes rises and people stop buying them as if they\u2019d gone off, we\u2019d say that the price is elastic. On the other hand, if the price goes up and people keep buying them as usual, demand is inelastic.<\/p>\n\n\n\n

So, how is this economic gem calculated? Easy. There\u2019s a formula:<\/p>\n\n\n\n

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If the result is greater than 1, demand is elastic (i.e., it changes significantly). If it is less than 1, it is inelastic (it changes little). If the result equals 1, we\u2019re dealing with unit elastic demand\u2014not terribly exciting, but economists like to mention it so it doesn\u2019t feel left out.<\/p>\n\n\n\n

Why does this matter? Because it directly affects revenue. If you sell a product with inelastic demand (like petrol), you can raise the price and earn more. However, if you are selling ice cream on the beach and get carried away with your pricing, you might end up with a mess of melted cones and no sales.<\/p>\n\n\n\n

Price elasticity of demand isn\u2019t the only type, of course. Price elasticity of supply measures how producers respond to price changes. If prices rise and producers ramp up production, supply is elastic. If they barely react, supply is inelastic. There\u2019s also income elasticity of demand, which tells us how demand shifts when income changes. If you earn more and start buying more sushi, it\u2019s a normal good with positive elasticity. If you earn more and stop buying instant noodles, it\u2019s an inferior good (and your taste buds thank you).<\/p>\n\n\n\n

Then there\u2019s cross-price elasticity, which looks at how the demand for one good changes when the price of another changes. If coffee prices rise and tea demand goes up, the two goods are substitutes. If printer prices rise and cartridge demand falls, they are complementary goods. If nothing changes at all, perhaps the goods are unrelated\u2014or the consumer is just confused.<\/p>\n\n\n\n

A note for the curious: elasticity is a useful tool, but it stems from human behaviour, which is what really matters. Individual choice\u2014subjective and contextual\u2014is the true driving force. Elasticity offers insights, but it never replaces the judgement of players in the market. And although it might seem like pure mathematics, at its core, it\u2019s about decisions, desires and priorities. Ultimately, it\u2019s about us.<\/p>\n\n\n\n

Here\u2019s an example. Imagine the price of bread goes up. Conventional theory says that if demand falls sharply, it\u2019s elastic. But with a critical lens, we should ask: Why, exactly, are people buying less bread? Have preferences changed? Have people switched to a gluten-free diet? Are they worried about inflation? Did a viral TikTok recommend intermittent fasting? Elasticity tells us the \u201cwhat\u201d, but not the \u201cwhy\u201d. And it\u2019s the \u201cwhy\u201d that really matters if we want to understand economics as the science of human action. Elasticity doesn\u2019t act, it doesn\u2019t choose, it doesn\u2019t dream of beach holidays. People do. So yes, elasticity is useful\u2014but handle it with care. It\u2019s not the Oracle of Delphi. It\u2019s more like a torch, shining light on part of the path.<\/p>\n\n\n\n

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Diari d’Andorra 14.05.2025<\/p>\n","protected":false},"featured_media":21058,"template":"","categories":[479,666],"tags":[],"class_list":["post-21065","opinion-article","type-opinion-article","status-publish","has-post-thumbnail","hentry","category-research-en","category-financial-analysis"],"acf":[],"_links":{"self":[{"href":"https:\/\/creandgroup.com\/en\/wp-json\/wp\/v2\/opinion-article\/21065","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/creandgroup.com\/en\/wp-json\/wp\/v2\/opinion-article"}],"about":[{"href":"https:\/\/creandgroup.com\/en\/wp-json\/wp\/v2\/types\/opinion-article"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/creandgroup.com\/en\/wp-json\/wp\/v2\/media\/21058"}],"wp:attachment":[{"href":"https:\/\/creandgroup.com\/en\/wp-json\/wp\/v2\/media?parent=21065"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/creandgroup.com\/en\/wp-json\/wp\/v2\/categories?post=21065"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/creandgroup.com\/en\/wp-json\/wp\/v2\/tags?post=21065"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}