Topic 5: Ripple Effects and Elasticity

Ripple effect is when the price or quantity of a product increase or decrease, other things in the economy are also affected, just like when you throw a stone into the water, it creates ripples. When the oil prices rise, other products such as car tires also increase in price. Airline ticket prices also rose by 9% and even things like carpets and diapers, which seem totally unrelated to oil, also rise in price. The increase in oil prices greatly affected our daily lives because we depend on oil on a lot of things. Candles, balloons, and even eye glasses are made somewhat with oil. The increase of oil prices can also increase the price of toothpaste, which can then affect the price of toothbrush. Not just oil will have a ripple effect on other products, other things such as bronze might also have an effect on other products. Elasticity is the measurement of how changing one economic variable affects others. Some products are inelastic. For example, medicine is inelastic because no matter how much the price is, people need to buy medicine to prevent themselves from dying. Most products are elastic, but not a lot of things are perfectly elastic. For me, drinks at the stores across our school are elastic. When the prices rise, I will just drink and buy less of them. When the price decreases or is on sale, then I will perhaps buy more. Things that are inelastic to me are limited edition products or medicine.