Economics – The allocation of resources - Price elasticity of demand (PED) | e-Consult

The price elasticity of demand can vary depending on the time period considered. In the short run, demand is often more inelastic because consumers have limited options to adjust their consumption patterns. In the long run, consumers have more time to find substitutes, change their habits, or adapt to the price change, leading to more elastic demand.

Example 1: Gasoline (Short Run). In the short run, consumers may need to travel to work or school, so they have limited ability to reduce their gasoline consumption if the price increases. Demand is relatively inelastic in the short run.

Example 1: Gasoline (Long Run). In the long run, consumers might switch to more fuel-efficient vehicles, carpool, use public transportation, or move closer to work if gasoline prices remain high. These changes will significantly reduce demand for gasoline, making it more elastic in the long run.

Example 2: Healthcare. Demand for healthcare is generally inelastic in the short run, as people need medical attention regardless of price. However, in the long run, individuals may change their lifestyle choices (e.g., healthier diet, exercise) to reduce their need for healthcare, making demand more elastic.