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What? Let me give you an example. Gasoline has inelastic demand. If the supply of gasoline drops such that it’s below the amount demanded, then the price will r

by afpx 8y ago

What? Let me give you an example. Gasoline has inelastic demand. If the supply of gasoline drops such that it’s below the amount demanded, then the price will rise to the maximum amount that people are able (not just willing) to pay, because there are few realistic alternatives for most people. Same goes for housing. And in San Francisco in particular. Unless supply meets demand (which it won’t for a very long time), prices will be pegged upward. I can’t see prices falling unless demand decreases, although I’m as hopeful as you.

stale2002 8y ago
Yes, Gasoline has inelastic demand. That means that if supply drops, then price goes way up. Now think about the reverse direction. IE, if supply for gasoline goes up, what happens to the price? prices goes way down. Inelasticity of demand means that price will change a lot, if supply changes. Supply goes up, prices goes way down. Supply goes down, price goes way up. If housing has inelastic demand, that means that if we build a small amount of housing, then price would go down a lot immediately. People talk a lot about the idea of "pent up demand". "Pent up demand" is the idea that if price changes, then a bunch of people will move to SF to immediately live in those new homes. That is an example of elastic supply. Inelastic would be the idea that nobody at all would move to SF to live in those houses if we built them, and they would just sit empty.
- afpx 8y ago
  Here’s a explanation of what inelastic demand is. https://www.quora.com/What-is-the-meaning-of-perfectly-inelastic-demand-and-perfectly-elastic-demand https://www.quora.com/What-is-the-meaning-of-perfectly-inela...
  - stale2002 8y ago
    Correct, this is exactly the explanation I gave. Here is a quote from one of the answers in the quora question that you posted, saying exactly what I stated: " If demand for a good is perfectly elastic in regards to price, the smallest change in price will change the amount demanded by an infinite value - if the price goes down a single cent, demand will grow to infinity (assuming a normal good whose demand is inversely correlated to price). If demand for a good is perfectly inelastic in regards to price, it means that no matter how the price changes, the demand will stay the same (if the price goes for 1 dollar to 1 million, the demand is the same)." IE, perfectly inelastic demand means that no matter how much supply/price changes, then demand doesn't change. If supply goes up, Nobody buys any more houses (because its inelastic). And price crashes. Inelastic demand applies to both the case of supply going up (therefore price goes down), and the case of supply going down (therefore prices going up). So if supply goes down, prices go way way up, and if supply goes up, then prices go way way down. Or in other words, if there is not enough of so

by afpx 8y ago

stale2002 8y ago

Yes, Gasoline has inelastic demand. That means that if supply drops, then price goes way up. Now think about the reverse direction. IE, if supply for gasoline goes up, what happens to the price? prices goes way down. Inelasticity of demand means that price will change a lot, if supply changes. Supply goes up, prices goes way down. Supply goes down, price goes way up. If housing has inelastic demand, that means that if we build a small amount of housing, then price would go down a lot immediately. People talk a lot about the idea of "pent up demand". "Pent up demand" is the idea that if price changes, then a bunch of people will move to SF to immediately live in those new homes. That is an example of elastic supply. Inelastic would be the idea that nobody at all would move to SF to live in those houses if we built them, and they would just sit empty.

afpx 8y ago
Here’s a explanation of what inelastic demand is. https://www.quora.com/What-is-the-meaning-of-perfectly-inelastic-demand-and-perfectly-elastic-demand https://www.quora.com/What-is-the-meaning-of-perfectly-inela...
- stale2002 8y ago
  Correct, this is exactly the explanation I gave. Here is a quote from one of the answers in the quora question that you posted, saying exactly what I stated: " If demand for a good is perfectly elastic in regards to price, the smallest change in price will change the amount demanded by an infinite value - if the price goes down a single cent, demand will grow to infinity (assuming a normal good whose demand is inversely correlated to price). If demand for a good is perfectly inelastic in regards to price, it means that no matter how the price changes, the demand will stay the same (if the price goes for 1 dollar to 1 million, the demand is the same)." IE, perfectly inelastic demand means that no matter how much supply/price changes, then demand doesn't change. If supply goes up, Nobody buys any more houses (because its inelastic). And price crashes. Inelastic demand applies to both the case of supply going up (therefore price goes down), and the case of supply going down (therefore prices going up). So if supply goes down, prices go way way up, and if supply goes up, then prices go way way down. Or in other words, if there is not enough of so