[Guide] Economics - Elasticity

[Syncness]

I'll be doing a brief and simple explanation of the elasticity in good in WoW (Price elasticity of demand - Wikipedia, the free encyclopedia).

The Wikipedia definition is pretty straightforward to understand, but as it goes in depth, it gets more confusing. I'll explain it as best as possible.
Here's their quote.

Price elasticity of demand (PED) is defined as the measure of responsiveness in the quantity demanded for a commodity as a result of change in price of the same commodity. It is a measure of how consumers react to a change in price.

We will be looking at http://en.wikipedia.org/wiki/Elasticity_%28economics%29

Now a real life example of a product being in-elastic is petrol. No matter how much the price changes, people will always buy it, as it is a necessity. Lets reflect this on WoW.

No matter how much the price changes for Scarlet Rubiespeople will always buy it, as it is almost a necessity for raiders. (STR,AGI gems)
Warriors and hunters can't socket a lower grade gem, as their GMs won't be too happy, nor can they gem another color, as it's not only useless, their GMs once again will not be happy.

A real life example of a product being elastic is luxury cars (Lets say convertibles). When there is a massive change (lets take increase) in price, almost NO ONE will buy it. Lets reflect this on WoW.

When the price of Lichbloom goes through the roof because new Flasks need them, Scribes choose a substitute good instead of Lichbloom. Icethorn and Adder's Tongue are substitute goods for Scribes because they all produce the same thing (and same amount) once milled.

In-game In-elastic example: Flasks
For raiding, especially high-end, every single raider is expected to have flasks, therefore, it is a necessity. So no matter how high the price soars, there WILL ALWAYS BE DEMAND FOR IT. They may not buy it already made (they will craft it themselves), but there is always a demand for it, therefore a movement in price will barely affect the amount demanded.

In-game elastic example: Orb of Deception - Item - World of Warcraft
No player needs this item. It is a luxury, and is therefore not required. So when there is a change in price (down) the demand for it will soar, because it is not a necessity!!

In-game in-elastic example: Infinite Dusts
Every single half-decent raider is expected to have their items enchanted, and therefore a necessity among raiders. This means that a small change in price will not affect the demand, as it is a necessity.

This topic is actually very hard to understand, if you have any questions, please feel free to ask.

Please see my other Economics 101 guide if you wish to further improve your understanding.
http://www.mmowned.com/forums/wow-gu...old-elite.html

Final Note: I understand that it's a wall of text, but here's something simple for you to swallow.

If you CBF reading, then GTFO. You will always be poor.

Don't lurk, posting Thank You! will be enough!

[!iMacroMage!]

This is a concept most people should understand in WoW, actually. It would be really helpful if you created a list of in-elastic and elastic items, however. Then again, I suppose elasticity of items can always change. For example, Low level JC mats are at unusually high prices right now because people know 3.2 is coming & people want to become JCs to prospect teh epix. So, there is a definite "need" on those low level mats, even though there are alternative crafts to get level ups, if all mats are high priced, it will force the buyer to participate in the madness.

It seems you have done quite a bit of research, and you deserve +Rep for this guide. Unfortunately my +Rep is on cooldown, so hopefully tomorrow I'll remember.

You're a very good contributor, [sync].

[anthonyninja1]

Wow, epic post! This summed alot of things up for me. =D
+REPx2

[gtdarkside]

+ Rep
Simply because Econ is my favorite school :P

EDIT: Woop, 3rd rep power

[madsherlock]

I actually have always thought of this as common sense. Does that mean I am intelligent?

Edit: I must compliment you for your choice of colors in your post. They match very well, giving it an aesthetic look.

[Grapesoda]

iv been using techniques related to theorys like this for quite a while now. Its how i made an empire of 36K gold on a lvl 1 alone. It's not as much as "what does the economy need" anymore as it is "want does it want". honestly, people are not that stupid nowadays. The necessity's will always be farmed and put up in the AH. The smartest moguls will take what people can't ordinarilly get, and put it up for dumbfounding prices. Why? becasue they know it will sell, and they know there are idiots anywhere they go. sure, you cant always rely on them, but they are there.

[nicktheone]

iv been using techniques related to theorys like this for quite a while now. Its how i made an empire of 36K gold on a lvl 1 alone. It's not as much as "what does the economy need" anymore as it is "want does it want". honestly, people are not that stupid nowadays. The necessity's will always be farmed and put up in the AH. The smartest moguls will take what people can't ordinarilly get, and put it up for dumbfounding prices. Why? becasue they know it will sell, and they know there are idiots anywhere they go. sure, you cant always rely on them, but they are there.

36k gold?!! man, share with us your secret

[!iMacroMage!]

36k gold?!! man, share with us your secret

Anyone can make that much on a banker. I've made well over 80K on one of my level 1 bankers. My spreadsheet helps me a lot, but so does Auctioneer addon.

[Syncness]

36k gold?!! man, share with us your secret

There's no secret, there never was, and there never is.

All those gold guides are telling you the same thing, "buy low, sell high" which is exactly what the laws of economics refer to.

Read my other guide linked to making money off patches, and understand it.

[egg1337lol]

So you're saying that people wont stop buying Scarlet Rubys and Infinite dust because its needed? Pretty noshit-sense?

And another thing, the supply and demand thingy, why do they use.. pictures and just draw an line over the other one?

[Rainen]

I might give it a try, thanks.

[Syncness]

So you're saying that people wont stop buying Scarlet Rubys and Infinite dust because its needed? Pretty noshit-sense?

And another thing, the supply and demand thingy, why do they use.. pictures and just draw an line over the other one?

It is noshit-sense because it is a law (of demand/supply).

The lines are demand and supply.

Supply is from bottom left to top right.
Demand is top left to bottom right. (lines)

The point that they cross is called an Equilibrium Point, it is where supply.. meets demand lol, and there is no excess is supply, and no excess in demand.

Which means the market's resources are maximized and used efficiently.

[Jibberish]

Thanks for the brush up on simple economics! I remember taking this course two years ago. Like you said... the generalities seem to be common sense, but as you actually delve into the concepts it gets really crazy.

This is a great guide in that it keeps it simple and puts it in everyday (IRL and WoW) terms of what it means.

[idusy]

I actually have always thought of this as common sense. Does that mean I am intelligent?

No.Fillingfillingfillingwithfiller

[Syncness]

Edit: I must compliment you for your choice of colors in your post. They match very well, giving it an aesthetic look.

That would be number 1 on the list of a guide: Presentation.