Question

7. Vaccine and Fish both cost 20 pounds EACH and there are approximately 50000 Vaccine and Fish sold in London every month respectively. But Fish got a more ELASTIC demand than Vaccine.

(i) What is the difference between the money value of the 50000th Fish and money value of the 50000th Vaccine?

(ii) What is the difference between the consumer surplus of Vaccine and consumer surplus of Fish?

Answer 1

Elasticity of demand in economics means the the ability and desire of the pople to purchase a commodity when its price is decreasing, when the price is increasing the demand for such commodities decreases. That is the effective desire of people to purchase something depends upon the variation in its price.

Here the two products mentioned above are vaccine and fish. The prices of each item for each single quanity remains same. But what makes the difference is its consumption. The method of consumption of the first product - vaccine - is that it is not a food item. It is a medicine. People have to consume the same only depends upon there physical condition. If there physical condition is worse, and the doctors advices them to consume the same, they have no other way, except to consume the product without considering its market value. On the other hand if they are physically okay there is no need for consuming vaccines even if it avaialable in the market at a cheaper rate, or even in a situation it can be provided at free of cost.

On the other hand fish is considered as a food item and people have the habit of consuming the same as a part of their food everyday. That is why when it is available in the market at a lesser price the consumption of the product will increase because with the limited income they purchase higher amount of the product. And when the price of the product increases the demand will decrease naturally not because of less requirement, but because the limitation in their purchasing power.

1. This is the subject closely connected with the Law of diminishing marginal utility.