I am really excited to learn more about this interesting topic. This formula is based on what I feel is a fairly well-established concept. I’ll be sure to keep an eye out for a follow-up post.
Arc elasticity of demand is a theory developed by Daniel Kahneman and Amos Tvershyr. It allows us to understand the idea that people are more likely to buy anything that they want, rather than anything that they need. With this in mind, we can see that when a product is expensive, it means that someone will be willing to pay a premium. However, our economy does not work that way.
The theory goes that if you give someone a good deal, they’ll be willing to pay more to get it, but not because they want more of it. They’ll pay because they have a desire to buy it.
How is it that people have a seemingly endless number of wants, while we have a finite number of goods and services? We are constantly creating new wants to satisfy. To a great extent, we are always inventing new goods to satisfy our wants. If there are two people in a room and they both want a cake, they are going to go at it and come up with the best possible cake.
In the case of arc elasticity, it has to do with the ease with which we can satisfy a desire. The more goods we can fulfill a desire, the longer the desire will last. It’s a very complicated and complex thing.
There are some ways that we can satisfy the need for more goods and services. For example, we could combine the need for bread and the need to have a glass of wine so we can have a glass of wine for dinner. (In other words, if we’re making bread, we can have a glass of wine for dinner so we can have a glass of beer for dinner.) And maybe we could create a “new” ice cream parlor that would have ice cream for every meal.
The way we can satisfy a desire is by taking a new supply of it. If we take more bread, then we can have more bread for dinner, and if we take more grapes, then we can have more wine for dinner. We can also make a new ice cream parlor that would have ice cream for every meal. We can put a lot of pressure on companies to create new things, create new needs, and then fill them.
While I don’t think we’ll end up filling all these needs and new needs will be filled for us, it still makes sense to take a good look at the elasticity of demand formula and see if it’s a good fit for our needs. At the end of the day, you have to use your own judgement, though. If we have a new ice cream parlor and we need many more ice cream parlors, maybe this ice cream parlor can be too much pressure.
If we had to choose between an ice cream parlor and a new ice cream parlor, we would probably choose the new ice cream parlor because it seems to be providing much more demand for ice cream parlors in general. We don’t have many ice cream parlors, but we do have ice cream parlor. So what that means is that even if we have new ice cream parlors, we wouldn’t necessarily have a better one.
Most of our thinking and actions are on autopilot. If I have a new ice cream parlor, I probably have to do something about it. If I have no ice cream parlors, I probably have to think something about it. If I have a new ice cream parlors on my desk, I probably don’t have to think about it. If I have a new ice cream parlors on my desk, I probably don’t have to think about it.