Global oil prices have recently been going up and yet the demand for fuel has not gone down. The demand for fuel is what you would call inelastic demand. Products or services with inelastic demand are those whose consumption is not greatly impacted by changes in price.
These products tend to be essential products like fuel, food, electricity, water, medicine, etc. We can’t do without these products and we will shift our budgets to be able to afford them whatever the price. This is the reason we buy expensive fuel.
Investing in products and services with inelastic demand makes a lot of sense. That is why we have entered the soap market in our cottage business. Soap is an essential product in almost every household and has few good alternatives. There will always be demand for soap. Other simple things like salt, sugar, foodstuffs, also tend to be inelastic. You can make more money from inelastic products by increasing prices.
Niche products on the other hand tend to have elastic demand. Dealing in designer fashion brands is good when the economy is doing well. However, when people begin to struggle economically they will abandon these non-essential goods first.
Some careers are also inelastic and it is advisable to join such professions. We all need doctors but can do without comedians. So in the general scheme of things becoming a doctor is better than pursuing a career in comedy. Of course, there are a few comedians doing really well, but these are the exception.
An understanding of the elasticity of demand can help you to choose the right career and business venture. You will generally do better in life by pursuing inelastic things.
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