Travel

Travel from the US has declined. This is most likely due to the increase of the Canadian dollar which discourages travel from the US but has seen an increase of Canadians travelling to the US. The increase in the Canadian dollar has made the exchange rate higher In the US and has increased the cost for US travelers to visit Canada. So if it is true that the exchange rate is a cause of decline in US travel to Canada then the demand would be elastic.

With international travel on the other hand, the exchange rate my work in favour of travelers from other countries. Another factor may be that the economy of other nations is currently stronger than that of the US. 

Other products in the travel industry that have an elastic demand would be air travel and hotels. The more visitors that arrive in Canada, the more hotels are demanded as well as flights.

Canadian Tourism Commission: http://en-corporate.canada.travel/sites/default/files/pdf/Research/Stats-figures/Tourism-performance/Quarterly%20International%20Travel%20Accounts/ITA_Q1_2010_EN.pdf

Elasticity

Arguably the leading company in technology right now is Apple. Everything they sell is extremely popular. There are lineups outside shop doors whenever there is a new product of theirs that hits stores. It is rumored that Apple will launch their newest product on October 17^th; the iPad mini.

The new iPad is highly anticipated with orders reportedly at 10 million units. Experts say that the major factor that determines the success of the new iPad is the price. If the price is below $300, then great success is anticipated.

Price elasticity of demand is the responsiveness of quantity demanded to a change in price. If demand for the new iPad is as high as predicted, then the demand will be inelastic, meaning that the quantity demanded is not very responsive to a change in price. The maximum price in this case is very important because if the price exceeds $300 then the demand will be elastic or is quite responsive to a change in price and demand will be at its lowest point. It is also worth noting that unitary elasticity is the point the percentage change in quantity is exactly equal to percentage change in price, so then, total revenue does not change.

Here is a graphed example of elastic and inelastic demand of the new iPad:

To calculate elasticity we simply take the percentage change in quantity and divide it by the percentage change in price. If the elasticity is over 1, then we have elastic demand. Elasticity demand of 1 is unitary and elasticity below 1 is inelastic.

The bottom graph shows how elasticity effects total revenue. At the midpoint, revenue is at a maximum while demand is unitary.  When price elasticity of demand is greater than 1, the total revenue rises. Also when price elasticity of demand is less than 1, the total revenue falls.

Durham, Jessica, Apple iPad Mini to Sell Millions, Strong Demand, Details on Release Date, Rumors, Why Price is Essential to Dominate Nexus 7, Kindle Fire 2,HD
http://www.booksnreview.com/articles/1316/20121008/apple-ipad-mini-sell-millions-strong-demand-details-release-date-rumors-why-price-essential-dominate-nexus-7-kindle-fire-2-hd.htm

Determinants of Demand

Determinants of demand are normal products, inferior products, substitute products and complementary products. The demand of normal products increase as income increases and demand decreases when income decreases. An example would be the latest video games. As our income increases, so does demand for video games. The demand decreases while our income does.

Inferior products on the other hand are products that experience an increase in demand as our income decreases and a decrease in demand as our income increases. No name brand products would be an example of inferior products. As income decreases, the demand for no name products rises.  As income increases, the demand for no name products decreases and there is an increase in demand for brand name products.

Switching from brand name products to no name products is an example of substitute products. If the price of a product increases, then there will be more of a demand for a similar product.

The demand for complementary products is related because they are purchased together. If you recall the video game example, let’s say that there is a new games console released and there is a high demand for it. Then there would also be an increased demand for accessories such as games, cables, extra controllers, etc.  

 Another example of substitute products effecting demand would be in the case of the Chicago Tylenol scare in the 80s.

There were a number of bottles of Tylenol that had been tampered with. Seven people died as a result of taking extra strength Tylenol with traces of cyanide in the capsules. Johnson & Johnson recalled all their bottles of Tylenol. Demand for Tylenol dropped significantly until the late 80s when Tylenol was re-launched.  While the demand fell for Tylenol, demand increased for substitute products.

http://iml.jou.ufl.edu/projects/fall02/susi/tylenol.htm

http://mediaguru-mayopr.blogspot.ca/2007/05/remember-tylenol-scare.html