Inelastic Market

I want to introduce a new concept called the Inelastic Market. To fully understand this concept, we first need to explore the economic ideas that form its foundation.

Understanding Inelastic Demand

Inelastic demand refers to a situation where the quantity demanded of a good or service changes by a smaller percentage than the change in price. In other words, even if the price rises significantly, demand remains relatively stable because consumers still need the product.

Common examples include:

• Gasoline – People still need to drive, even when gas prices increase.
• Medications – Life-saving drugs are purchased regardless of cost.
• Basic utilities – Electricity and water consumption tend to remain stable despite price fluctuations.

Here is an article from thebalance.com explaining inelastic demand. It states:

"You calculate demand elasticity by dividing the percentage change in the quantity demanded by the percentage change in price. If the quantity demanded changes in the same percentage as the price, the ratio is one. Any value below one is considered inelastic."

This means that no product is completely inelastic—there is always some level of elasticity—but certain products are significantly more inelastic than others.

How Elasticity Changes Over Time

While some goods have inelastic demand in the short term, consumer behavior can shift over time, making demand more elastic.

Example: Gasoline Prices

When gas prices spike suddenly, people initially continue driving the same amount. However, over time, they may:

• Buy fuel-efficient or electric vehicles.
• Move closer to work, school, or public transportation.
• Reduce non-essential trips.

Because cars and housing are long-term investments, these changes take time to materialize. A consumer cannot instantly switch to a fuel-efficient vehicle or relocate, but they will factor these concerns into future decisions.

Example: Technological Obsolescence

A product that was once inelastic can become obsolete due to innovation. Consider:

• Landline phones → Replaced by mobile technology.
• Print newspapers → Declined with the rise of digital media.
• Horse-drawn carriages → Became obsolete with automobiles.

If a revolutionary technology like teleportation were invented, gasoline demand would plummet overnight, no matter how cheap gas became.

Survival Needs and Societal Functioning

For short-term survival, a person requires:

• Air
• Water
• Food
• Shelter

For long-term survival, they require:

• Healthcare – Essential for long-term well-being.
• Education – Essential for long-term development.

And for a person to function within society, they require:

• Transportation – Necessary for employment and access to services.
• Communication – Enables participation in society.

Each of these necessities exists within an Inelastic Market—meaning that demand remains stable because people must obtain these goods and services to survive or function in society.

Defining the Inelastic Market

An Inelastic Market is a market in which the total demand for a category of goods or services remains stable regardless of price fluctuations.

For example, the food market is inelastic because:

• People must eat, so total food demand remains steady.
• However, individual products (like beef, chicken, or soy) compete with substitutes, which creates elasticity within the market.

If a market had no substitutes —such as if cod were the only available protein source— then demand for cod would be perfectly inelastic.

Every category listed in Survival Needs and Societal Functioning falls within an Inelastic Market.

• Housing – People always need a place to live.
• Food – People need to eat.
• Healthcare – Demand remains steady regardless of cost.
• Utilities – Electricity, water, and heating are essential.

Understanding Inelastic Markets helps explain why some goods and services—like food, housing, and healthcare—cannot be treated the same as luxury or discretionary items. These necessities require economic policies that ensure affordability.

The SSOL framework builds on this concept, ensuring that wages are tied to the cost of inelastic goods rather than arbitrary minimum wage laws. By doing so, SSOL ensures wages keep pace with essential costs, promoting economic stability while allowing market-driven pricing for all goods.