"South African motorists will be paying the highest they ever have for petrol from midnight tonight.And to compound their woes, it looks set to increase again in the near future."
"Joburg petrol station owners are anxious about their pumps running dry today as motorists clamour to fill up before the huge price increase at midnight. "
Are people going to stop purchasing fuel when the price is increased? Are they going to walk to their destination? Are they going to purchase a new living place near to their offices? The answer is no. There is no solution to that, except facing the fact that they have to accept the increased price.
As the years goes by, the news of the prices of fuel increasing can be seen and heard so frequently. It is gradually increasing as time goes by. Fuel is something the all of us need in order to continue our everyday lives. In other words, it is a necessity. Without fuel, transportations are not possible. People won't be able to move around to the places they want, export & import wouldn't exist and also many others.
As a result, even when the price rises, the demand is not significantly impacted. Therefore, fuel is an inelastic demand.
Based on the graph above, the explanation goes when the price of fuel rises, the change in quantity demanded is only a little. This is why fuel is an inelastic demand, as it is a natural resources and there is no substitutes to it. People have no other choices but to purchase it as they need it or their daily activities can't be done.
Written by : Ling Xin-Zhe 0315463
Resources:
http://www.iol.co.za/business/business-news/price-hike-pumps-up-petrol-pain-1.1540696#.Ud8V3vnfBHQ
Why do you think people refuse to walk as a solution?
ReplyDeleteIt's because walking is not convenient, as walking costs a lot of time. People need to move around easily in order for them to run errands, earning money. Therefore, although the prices of fuel increases, people would still buy it.
ReplyDelete