Demand Elasticity

Here’s your underwear band thingy. The bane of wedgies, super wedgies, atomic wedgies and over-the-head wedgies all around the globe.

What do they all have in common? Stretchiness. The band stretches and moves and gives.

Well, think about that elastic as representing the marketplace for a paperback copy of Moby Dick. It’s the same new paperback copy, freshly minted with that, um…new book smell. It’s the same product whether you buy it on Amazon, Barnes & Noble (for both people who still shop there) or at walmart.com, which has 34 more buyers than Barnes & Noble, so it’s the second place “winner” in the Book Wars saga.

Moby Dick. Same total commodity product. And lots of sellers of it. So the volumes sold depend almost entirely on price. Or rather, if the price of that book drops like two percent, you’d just buy it wherever it's sold cheaper. It's a total commodity, so the curves move around like…elastic. A buyer will go to the area of least, uh…resistance. And yeah...it’s like what happens in that atomic super wedgie.

So if elastic means “no pricing power of the seller, and very low margins for the seller and a world where the buyer has all the power”...then what’s inelastic?

Well, it’s when you try to do an atomic wedgie on some dude wearing steel underwear. It doesn’t move. The material is inelastic.

Inelastic would be the sole remaining copy of Moby Dick, signed by Melville himself, and still with a little whale blubber oil on the manuscript cover. There’s only one copy. And hundreds of billionaires all around the world who read (or maybe just care about important literature) would love that copy. Could it sell for 50 bucks? A thousand? A hundred thou? A mil? Sure sure sure sure sure. All the power is with the one seller of that product, who can charge almost anything they want when they go to sell it.

Think of inelastic demand as being things you can’t live without. Like that last drink of water for a parched human traveler in the desert. Or chemotherapy to a cancer patient. Prices can go up or down, and it won’t matter. Buyers will pay and sellers will reap the powered rewards of inelasticity.