According to Investopedia (2014), Elasticity is defined as, “A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes.” This paper will reflect on a multitude of things such as why some products become substitutes, why some are complements as well as provide examples of each.
The product that our group chose to reflect on in this paper, is a car. There are a multitude of other ways that people commute back in forth besides using a car, some examples ...view middle of the document...
It is often the only way of getting to smaller towns if you are not driving a car. Walking and cycling are healthy and cheap ways of getting around and this is a good source of exercising working out. Shuttle van senior citizens use this form of transportation because of lost cost, no car, and safety issues this is a community form base of transportation services for citizens. Ferry boats are a common way to travel base on where you live. Ferries carry passengers and vehicles.
Goods such as motorcycles, trucks, SUVs', bikes, trains, airplanes, boats, bus systems, walking, shuttle systems, and ferries are substitutes that can be used as substitutes for one another, but some of them are complements to those substitutes. To differentiate substitutes from complements one should know the definition of both. Substitutes are “goods that can be used in the place of one another”, one the other hand, complements are “goods that are used in conjunction with other goods” (Colander, 2013, p. 136). When prices of a good are reduced or falls, then demand for complements rise; the “cross-price elasticity of complements is negative” (Colander, 2013, p. 136). For example, some of the above substitutes rely on fuel in order for them to operate, and since fuel in used in conjunction with those goods, then fuel is considered a complement to those substitutes. When the price of fuel...