Elasticity Translated

Ajay Shah explains what’s hidden behind the economic term “elasticity” – people with empty bellies:

GDP growth yields fewer poor people who respond to higher wheat prices by purchasing less meat or wheat, i.e. we have less of a shock absorber. That generates a reduced elasticity of demand of wheat. So prices have to rise by more in order to clear a supply-demand imbalance than was required in the past when there were more poor people who would adjust.

One Comment

  1. What, you mean economics affects actual people? Sheer craziness.

    There’s a quote I’ve spent hours (unrelated to this) looking for, I think by Clement Attlee, which is basically “What this generation considers luxuries the next will consider necessities”. I guess the expectation of food regularly is not something economics can really auto-correct away from.

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