Economic concepts often sound intimidating, like something you only need to understand if you’re wearing a suit and holding a briefcase, or working on Wall Street. But the truth is, economics and the nuances of finance show up in life constantly, especially when you’re a college student trying to make your bank account survive the semester.
One of the foundational concepts to understand is the difference between elastic and inelastic goods. If you’ve ever wondered why gas prices can shoot up overnight and everyone still fills up their tank anyway, or why one small price jump makes you suddenly cancel a subscription, you already understand elasticity. You just didn’t have a name for it yet.
At its core, elasticity is about how people react when prices change. It measures whether demand stays about the same when a price increases, or whether consumers quickly change their behavior. In other words, elasticity isn’t just a textbook definition. It’s a way of explaining the everyday choices we make without thinking.
Economists call this price elasticity of demand, which is a long phrase for a simple question: If something gets more expensive, do people keep buying it? If they do, demand is inelastic. If they don’t, demand is elastic.
The important thing to note is that elasticity isn’t determined by whether something is “cheap” or “expensive.” It’s determined by whether you need it, and whether you can easily replace it with something else.
When a Good Is Inelastic: You’re Buying It Anyway
An inelastic good is something people keep purchasing even when the price rises. That usually happens because the product feels essential, or because there aren’t good alternatives available.
The easiest example is gasoline. When gas prices spike, nobody is happy about it, but most people don’t actually stop buying gas. Students still need to drive to campus. Athletes still have practice. People still have work shifts they can’t miss. In the short term, there’s often no realistic substitute, which means demand stays steady even as the price climbs.
That’s why gas prices can jump so dramatically during supply disruptions. People might cut out a few unnecessary trips, but they still need enough fuel to function. Complaining doesn’t change the fact that the tank still needs to be filled.
Other common inelastic goods include basic necessities like staple foods, utilities and essential medications, such as stimulants, diabetic medication or antidepressants. If a good feels required for daily life, consumers are willing to absorb higher prices because the alternative is simply not realistic.
When a Good Is Elastic: You Have Options
Elastic goods work differently. An elastic good is something people can easily stop buying, delay purchasing or swap for another option when the price changes. If a company raises the price and customers immediately start disappearing, that’s elastic demand in action.
Think about something like the classic Coke versus Pepsi dilemma. If Coke becomes more expensive and Pepsi stays cheaper, many people will switch brands without a second thought. The products are similar enough that consumers are not loyal to one, and the price difference suddenly matters a lot.
The same thing happens with a lot of college-student spending. Streaming services, trendy clothing brands, daily coffee runs and entertainment like concerts or games are all purchases where demand can drop quickly if the price feels too high. When you have choices, you’re more likely to react.
Elastic goods are basically the nice-to-have category. You might love them, but you don’t need them, and that makes your demand more sensitive to price changes.
So What Actually Determines Elasticity?
Elasticity comes down to a few key factors, and once you understand them, you start noticing them everywhere.
First is necessity. The more essential a product is, the less likely consumers are to change their behavior when the price rises. Second is the availability of substitutes. If there are a dozen alternatives, demand is more elastic. If there are none, demand is more inelastic.
The third factor is time and this matters more than people realize. In the short run, demand tends to be more inelastic because habits and routines are hard to change overnight. Over time, demand can become more elastic as people adjust.
Gasoline is, again, a perfect example. In the short term, you can’t just stop commuting. But in the long term, people might move closer to work, start carpooling, rely more on public transportation or switch to electric vehicles. The more time consumers have to adapt, the more flexibility they gain and the more elastic demand becomes.
Elasticity Isn’t Fixed: COVID-19 Proved That
One of the most interesting things about elasticity is that it can change depending on what’s happening in the world. The COVID-19 pandemic made that obvious.
Before the pandemic, hand sanitizer was not widely considered essential. But COVID-19 made it a necessity overnight. Demand surged, shelves emptied and people were suddenly willing to pay much higher prices.
That shift shows that elasticity isn’t permanent. It depends on circumstances, availability and how necessary something feels in the moment.
Elasticity is one of those concepts that becomes more useful the more broke you are, which means it’s basically made for college.
Understanding elasticity explains why some prices feel impossible to escape. Rent, utilities and transportation costs don’t leave you many options, which is why those expenses can feel so frustrating. When demand is inelastic, consumers don’t have much power.
Elasticity also helps you see where your flexibility does exist. If you’re trying to cut spending, it’s easier to adjust elastic categories like subscriptions, eating out, brand-name shopping or entertainment. Those are the areas where switching, reducing or delaying purchases actually works.
It’s not about never spending money on fun things. It’s about recognizing where you have choices and where you don’t.
Elasticity is really just a fancy way of describing choice. The more options consumers have, the more power they hold. When alternatives are limited, sellers gain more control over pricing.
Once you start thinking this way, everyday price changes make more sense. The gas station, the grocery store and even your streaming apps are all examples of elasticity playing out in real time. And when you understand the difference between elastic and inelastic goods, economics stops feeling abstract and starts feeling like a practical tool for navigating your own financial decisions.