Chapter 14 Chapter 4 The Elasticity of Desire

The first section defines the elasticity of demand. We have seen that the only general law concerning a man's desire for a commodity is that, other things being equal, the desire for it diminishes every time his possession of it increases.However, this decline may be slow or rapid.If it were slow, the price he would charge for the commodity would not fall very much on account of a great increase in his possession of it; Increase.However, if this decline is rapid, the small drop in price will cause only a small increase in his purchases.In the former case, his willingness to buy the thing is greatly expanded by a small temptation: we may say that his desire is more elastic.In the latter case, the additional temptation caused by the fall in price does not increase his desire to buy: that is, his demand is less elastic.If the supposed fall in the price of tea from sixteenpence to fifteenpence a pound would greatly increase his purchases, an increase in the price from fifteen to sixteendence would also greatly reduce his purchases.That is, demand is elastic when prices fall, and demand is elastic when prices rise.

This is true of a person's needs, and so is the needs of the entire market.We can generally say: the size of demand, demand, elasticity (or inductance, responsiveness) in the market is how much the quantity demanded increases when the price falls to a certain degree, and how much it increases when the price falls to a certain extent. The degree of increase depends on the amount of reduction. Section 2 A price that is relatively low for the rich may be relatively high for the poor. Prices so relatively high as to be almost unaffordable to the poor may be indifference to the rich; the poor, for example, have never tasted wine, but the very rich may drink it as much as they like, without thinking of its cost.So we get the clearest idea of ​​the law of the elasticity of demand when we consider society one class at a time.Of course, there are many degrees of richness even among the rich, and degrees of poverty among the poor; but for the present we do not ask these small distinctions.

When the price of a thing is relatively very high to any class of people, they will buy but a small quantity of it; and in some cases, even after its price has fallen greatly, custom and custom It will make them not use this thing casually.This thing may still be reserved for rare special occasions, or in times of serious illness, etc.But, though not rare, this case has not become the general rule; in short, a great fall in the price of the thing, as soon as it becomes a commodity, greatly increases its demand.The elasticity of demand is large for high-priced goods and large, at least considerably large, for medium-priced goods;

However, the elasticity of demand falls as prices fall, and if the fall in price reaches its peak, the elasticity of demand gradually disappears. This law seems to be valid for almost all commodities and the needs of every class of people; there are only two exceptions: First, the level of high-priced end and low-priced starting point is different for different classes of people. ;Secondly, the end point of low price and the starting point of low price are also different for people of different classes.Much variation in details, however, arises chiefly from the fact that some commodities are ones for which people tend to reach a point of saturation, while others—mainly things for display—have an insatiable appetite for them. of.For the latter, the elasticity of demand remains considerable no matter how the price falls, whereas for the former, once the low price is reached, demand becomes almost completely inelastic.

The third section continues. The prevailing prices of certain things in England are comparatively low, even to the poorer ones, as is the case with table salt, many kinds of spices, and cheap medicines.It is doubtful whether the fall in the price of these things would give rise to any great increase in consumption. Take the prevailing prices of meat, of milk and tallow, of woolen goods, of tobacco, of imported fruit, and of common medical supplies: every change in prices produces a great change in the consumption of these commodities by the working and lower middle classes; No matter how cheap it is, the rich do not greatly increase their own personal consumption.In other words, the immediate demand for these goods by the working class and the lower middle class is very elastic, although the same is not true of the rich.But the working class is so numerous that its consumption of these commodities is much greater than that of the rich; the aggregate demand for all such things is therefore very elastic.Not so long ago sugar was included in this class of commodities: but the price of sugar has now fallen so much in England that it is relatively cheap for the working classes, and the demand for sugar is therefore inelastic.

Take the prevailing prices of hot-house fruit, of the best fish, and of other luxuries of a considerable cost: every fall in the price causes a considerable increase in the consumption of these things by the middle classes; In other words, the middle class is very elastic in its wants for them: neither the rich nor the working class have very elastic wants of these things, for the rich, since demand is almost saturated, and for the working class because the price is still too high. The prevailing prices of things like expensive liquor, out-of-season fruit, highly skilled medical and legal services, etc., are so high that there is little demand for them except the rich: This need is often very flexible.Part of the need for more expensive food is really a need for means of social prestige, and this need will hardly ever be saturated.

Section IV deals with general reasons affecting elasticity. The case of necessities is exceptional.When the price of wheat is high or low, demand is almost inelastic: at least if we assume that, even in times of scarcity, wheat is the cheapest food for man; This will be the case for other consumption.We know that a drop in the price of a four-pound loaf from sixpence to fourpence has had no effect on increasing the consumption of bread.As to the reverse, it is more difficult to determine, for there has never been a shortage of wheat in England since the repeal of the Corn Acts.But, judging by the experience of less prosperous times, we may suppose that a shortage of one-tenth of the supply would raise the price by three-tenths, and that a shortage of two, three, four, or five-tenths would raise the price by tenths. Eight, sixteen, twenty-eight or forty-five quarters. ①It is true that price changes much larger than this are not uncommon.For example, wheat sold for ten shillings a bushel in London in 1335, but fell to ten pence the following year.

If it is not a necessity, but perishable and the demand for which is inelastic, its price will fluctuate even more violently than the above: fish may be expensive on a given day, while two or three It will be sold as fertilizer in a few days. Water is one of the few things for which we can observe consumption at various prices—from the highest price to none at all.At moderate prices, the need for water is very elastic.However, the various uses of water can be completely satisfied: because the price of water falls to near zero, the demand for water becomes inelastic.Much the same is true of table salt.The price of salt in England is so low that the demand for it as a food is very inelastic: but in India the price is higher and the demand is more elastic.

Housing prices, on the other hand, have never fallen very low except where the inhabitants themselves have given up.Where social conditions are good and there is no hindrance to general prosperity, the demand for housing always seems to be elastic, because housing affords real convenience and social status to people.The desire for clothes which are not intended for ostentation is capable of saturation: when such clothes are cheap, the demand for them is inelastic. The need for things of higher quality is largely a matter of feeling: some people don't care about the aroma if they can get a lot of wine;In common working-class districts, the price of second-class and first-class meat is almost the same: but some well-paid artisans in the north of England have developed a taste for the best meat, and will pay The best meat is bought at almost as high a price as in the West End of London, where the price is artificially high because the inferior meat has to be shipped elsewhere for sale.Habit also gives rise to acquired dislikes and likes.The illustrations in a book will find the book attractive to many readers, but repulsive to those who are accustomed to better works and dislike illustrations.A person with a high degree of music appreciation will not listen to bad music performances in a big city. If he lives in a small city, he may listen to them happily. In a small city, he will not hear good music performances. Because there are not many people who are willing to pay a high price for the cost of music performance.The effective demand for first-rate music is elastic only in large cities, while the effective demand for second-rate music is elastic in both large and small cities.

Generally speaking, the wants are most elastic for those things which can be put to many different uses.For example, water is firstly needed for drinking, then for cooking, and for various washings, etc.When there is no particular drought, and water is sold by the cask, the price may be so low that the poorer ones drink as much as they can, and they sometimes use the cask twice for cooking, and for washing. They are rarely used.Men of the middle classes may not use a bucket of water twice for cooking; but they use a bucket of water for washing far more economically than they would if they had unlimited water.When water is supplied from pipes and charged at a low rate by the meter, many people use it as much as they like, even when washing; If all the places are piped, the use of water for all purposes reaches the limit of complete saturation.

On the other hand, in general terms, first, the need for absolute necessities (as distinct from ordinary necessities and those necessary for maintaining efficiency), and, secondly, for some of the luxuries used by the rich that cost them little income. needs are very inelastic. Section V deals with difficulties related to the time factor. So far we have not considered the difficulties of making precise lists of needs and of interpreting them correctly.The first difficulty we must consider arises from the time factor, which is the source of many of the greatest difficulties in economics. A demand-price list—ceteris paribus—represents changes in the price at which a commodity can be sold due to a change in the quantity offered for sale; but in fact, Other things are not going to remain unchanged for long enough to collect complete and reliable statistics.Obstacle causes often occur, and the effects of these causes are mixed and not easily distinguished from those of the particular cause which we are trying to separate.This difficulty is compounded by the fact that, in economics, the full effect of a cause seldom occurs immediately, but often manifests itself after the cause has died down. First of all, the purchasing power of money is constantly changing, and the results we get from the assumption that money maintains a uniform value need to be corrected.We can, however, overcome this difficulty fairly well by knowing with considerable accuracy the more general changes in the purchasing power of money. Then there is the general prosperity, and the change in the whole purchasing power at the disposal of the whole society.The effects of these changes are important, but not as important as is generally thought. For, as the wave of prosperity goes down, prices fall, thus increasing the means of those who have regular incomes at the expense of those who depend on business profits for their income.The downward fluctuations of prosperity are generally measured almost entirely by the apparent losses suffered by the latter; but the statistics of the total consumption of such commodities as tea, sugar, butter, woolens, etc., prove that the total purchasing power of the people Not all at the same time falling very quickly.There is still a decline, but we have to compare the prices and consumption of as many things as possible to be sure of the extent of the decline. Again there are changes due to the gradual increase of population and wealth.For these changes, if we know the facts, we can easily make numerical corrections. Section VI Changes in fashion. Next, we must take account of changes in fashions, tastes, and habits, as well as the creation of new uses for a commodity, and the discovery, improvement, or fall in price of other substitutes for it.In all these cases the consideration of the time which elapses between the economic cause and its effect presents great difficulties.For it takes time for a rise in the price of a commodity to exert its full influence on consumption.It takes time for the consumers to become accustomed to the substitutes which they can substitute, and I am afraid it will take time for the producers to acquire the habit of producing a great number of substitutes.Time is also required for the growth of habits of familiarity with new commodities, and for the discovery of means of using them economically. For example, when wood and charcoal became dear in England, the habit of using coal as a fuel grew slowly, but the adaptation of furnaces to coal was slow, that is, where water transport was convenient, the Organized trade did not take place rapidly either: the invention of methods for the industrial use of coal as a substitute for charcoal was even slower, and indeed has not yet been completed.Next, when the price of coal has become dear in recent years, coal-saving inventions have been greatly stimulated, especially in the production of iron and steam; Some of them have achieved great practical results.Again, when a new tramway or suburban railway opens, even those who live near the line do not immediately get into the habit of making the most of it, and among those whose workplaces are near one end of the line Many people move over a much longer period of time to live closer to the other end of the route.Again, when at first kerosene was in abundance, few were willing to use it freely; gradually all classes of society became accustomed to kerosene and kerosene lamps: The price drop that has occurred since then would place too much emphasis on the impact of the price drop. Yet another difficulty of the same kind arises from the fact that there are many things to buy which can be easily postponed for a short time, but not for a long time.This is often the case with clothing and other things that wear out gradually, but which, under the pressure of high prices, manage to last a little longer than usual.For example, the recorded consumption of cotton in England at the beginning of the cotton famine was very small.This is partly because retailers have reduced their inventories, but mostly because people are generally trying to last as long as possible without buying new cotton products. By 1864, however, many felt that it could not wait any longer; although prices were then much higher than in any previous year, domestic consumption of cotton was much higher that year.In such commodities a sudden want does not presume to raise the price exactly to the extent which corresponds to the reduction in supply.In the same way, after the Great Depression of the United States in 1873, we see the boot industry recover before the general garment industry; In terms of boots, not so much has been preserved. Section VII deals with difficulties in obtaining the necessary statistics. The above difficulties are fundamental: but there are other difficulties which are as evident as the more or less unavoidable shortcomings of our statistical tables. If possible, we hope to obtain a series of prices, and at this series of prices, different quantities of the same commodity can find buyers within a certain period of time in a market.A complete market is a large or small area in which many buyers and sellers are so closely watching and so acquainted with each other that the price of the same commodity is practically the same throughout the area. of.But, leaving aside the fact that those who buy for their own consumption, and not for trade, are frequently inattentive to every change in the market, there is no way of knowing exactly what prices are paid in many transactions. Moreover, the geographical boundaries of a market are not very clearly demarcated, except in cases of sea or customs frontiers; and no country has correct statistics of the commodities it produces for its own consumption. Second, there are often ambiguities even in existing statistics.These statistics charge the goods to consumption as soon as they are in the hands of the merchant; and therefore an increase in the merchant's stock cannot be easily distinguished from an increase in consumption.However, these two increases are governed by different causes.The rise of prices will tend to check consumption; but if this rise is to be expected to continue, it will probably, as has been said, lead the merchants to increase their stocks. Again, it is also difficult to ensure that the goods in question are always of the same quality.After a dry summer, wheat was still wheat, but exceptionally good; and the price of wheat for the next harvest seemed to be higher than it should be.It is possible to take this into account, especially since dry California wheat is now the standard wheat.But it is almost impossible to take due account of the variations in quality of many kinds of manufactured products.The difficulty arises even with such things as tea: the substitution of stronger Indian teas for weaker Chinese teas in recent years has caused a real increase in consumption than is indicated by statistics. Section VIII Explanation of consumption statistics.Merchant's ledger.Consumer's budget sheet. Governments of many countries publish general consumption statistics on certain categories of goods.But, partly for the reasons mentioned above, these statistics do little to help us in searching for a causal relationship between changes in prices and changes in the quantities people will buy, or in the distribution of various types of consumption among the different classes of society. . With regard to the first of these two ends—that is, the discovery of the laws of changes in consumption caused by changes in prices, if we understand that Jevons (see his Theory of Political Economy, pp. 11, 12) proposes A hint about the shopkeeper's books would seem to be of great benefit.In the working-class district of an industrial town, a shopkeeper or manager of a co-operative shop will often have the means of knowing with a fair degree of accuracy the economic situation of the majority of his customers.He could know how many factories were open, how many hours were worked in the week, and he could inquire in detail about important changes in wage rates: in fact he made it his business to inquire about such things.As a rule, his customers are quick to learn of changes in the prices of the things they use every day.He will therefore often know that an increase in the consumption of a commodity is caused by a fall in its price, a cause which acts rapidly, and which acts alone and has no other interfering combination.Even where obstructive causes exist, he is often able to consider their influence.He would know, for example, that when winter comes, the price of butter and vegetables goes up; but the cold weather makes people want more butter and less vegetables than before; When prices are all rising, he would expect a greater decrease in the consumption of vegetables than would be caused by the increase in price alone, but not so much in the consumption of butter.If, however, in two consecutive winters his customers are about the same number, and their wages are about the same; A comparison of the accounts of the two countries will give a very correct account of the effect of changes in prices on consumption.Shopkeepers who supply other classes of society must sometimes be able to furnish the same facts about their customers' consumption. If we can obtain enough tables of the needs of people in various parts of society, these tables can provide an indirect method of measuring all changes in needs caused by large changes in prices, so as to achieve the purpose that other methods cannot achieve.For the price of a commodity generally varies only within narrow limits; and therefore statistics give us no direct means of conjecturing what its consumption will become if its price is five times or one-fifth of its original price. .We know, however, that if its price is very high, its consumption is almost entirely confined to the rich, and if its price is low, its consumption, for the most part, lies largely with the working classes.Therefore, if the current price is relatively high for the middle class or the working class, we can infer from their law of demand at the current price: if the price rises to be relatively high even for the rich, What would the needs of the rich be like.On the other hand, if prices are now relatively moderate for the rich, we can infer from the needs of the rich: if prices fall to a level that is also relatively moderate for the working class, the needs of the working class will how is it.Only by thus bringing together the incomplete laws of demand can we hope to arrive at nearly correct laws for widely varying prices. (That is, until we can combine the demand curves of the segments of the various classes of people in society into the aggregate demand curve, we cannot reliably draw the aggregate demand curve for the same good at prices close to the prevailing price. See chapter chapter 2.) If some progress has been made in the transformation into definite laws of demand for commodities for immediate consumption, then—and until then— It would be useful to perform the same work on those secondary wants which depend on this commodity-the secondary needs being: the need for the labor of skilled and other workers who take part in the production of things for sale; And the need for machines, factories, railroad materials, and other means of production.The demand for the work of medical personnel, domestic servants, and all those who serve directly to consumers is of the same nature as the demand for commodities for direct consumption, and the laws of this demand can be studied in the same way. Be sure that the various classes of men in society differ between necessities, comforts, and luxuries, between that which affords mere present pleasure and that which increases physical and moral power, and finally between that which gratifies lower desires. It is an important and difficult business to apportion expenditures in proportion to those which encourage and cultivate higher desires.During the past fifty years various efforts have been made to this line of study on the Continent; lately there has been increasing effort to study the problem not only on the Continent but also in Britain and the United States.