Hidden Role of Time in Elasticity | Last Minute Economics

Added: 2026-05-22

[00:00:00]Time period matters in elasticity of demand. In the short run, consumers may continue purchasing sugary drinks or continue smoking and drinking out of habit even after prices rise. So, initially, demand may appear relatively inelastic, but in the long run, people get more time to adjust their behavior, discover substitutes, and change habits.

[00:00:22]They may gradually shift toward healthier alternatives, making demand more elastic over time. That is why government often combine taxes with awareness campaigns, nutrition labeling, restrictions on advertising, and promotion of healthier substitutes. So, demand is usually more elastic in the long run because consumers have more time to respond to price changes. Take petrol for example. In the short run, when price rises, petrol demand will be relatively inelastic because people still need to travel immediately. But over time, consumers may shift to electric vehicles, use public transport, or even relocate closer to work. The same logic applies to electricity consumption, too. Over time, households and businesses may adopt energy-efficient appliances or invest in solar panels to reduce electricity costs. But do you think government subsidies can also change elasticity with time? Tune in to find out.