Microeconomics – Product & Resource Markets
It was at Menlo Park Laboratory Complex that Thomas Edison first unveiled the incandescent light bulb in December 1879 (Bellis 2006). More than a century has passed and, in that time, his famed invention has spread all over the world, marking great cities visible to passing planes. It has diminished from an astonishing wonder to an everyday, commonplace thing. In a large portion of the globe, light bulbs have become a basic necessity, placing it among products with inelastic demand.
Without the artificial lighting, all manner of work at night would have to be severely limited. Artificial lighting also satisfies the demand for abstract concepts like the feeling of security and comfort. Demand for this product is inelastic because there are no substitutes for light bulbs; no other invention can efficiently produce artificial lighting. Incandescent light bulbs can be sold for less than a dollar a piece and requires a very small proportion of income. Changes in the price of artificial lighting is likely to cause only relatively small shifts in demand.
If more than a century after Edison invented incandescent lighting, a new invention was placed in the market- a paint product that provided light when supplied with a weak electrical current. This new product presents itself as a substitute, which in turn, steals dollar votes for light bulbs. The quantity of light bulbs is sure to go down as some consumers favor the new product, forcing light bulb manufacturers to either exit the industry, increase prices, lower manufacturing costs, or innovate.
A lot of women around the world, even those who don’t know fashion TV and the like, want a Prada bag. They can fetch a price of some hundreds to thousands of dollars. The supply for these bags, however, is inelastic. Even if the tiniest bag were to suddenly jack up in price, the quantity of Prada bags in the market would remain the same, or even go down as Prada will realize that their market has shrunk considerably. A Prada bag is unique, requiring very specific materials and highly skilled labor, including that of the designer, put together in a controlled manner. Because there is only one fashion house for Miuccia Prada, she, as a resource, has no substitution possibility contributing to the inelasticity of supply.
Bellis, M. (2006).
The inventions of Thomas Edison. Retrieved November 2, 2006, from: