Category: Economics 101

Image by Momentmal from Pixabay

Inspiration for this series of posts comes from a great podcast called Planet Money that’s produced by NPR.  This summer, Planet Money produced a series of podcasts called “Planet Money Summer School“.  It inspired me to do some blog posts dedicated to those topics!

This is part 4 in my series called “Economics 101”. If you’re interested, you can start with

• Part 1- Sunk Costs and Opportunity Costs
• Part 2 – Supply and Demand
• Part 3- Elastic and Inelastic Demand

In this post, I’m going to talk about an economic concept called “tragedy of the commons”.

What is the tragedy of the commons?

A “tragedy of the commons” situation occurs when there is a) a shared-resource system and b) individual users deplete the resource through their shared action. To make this a little easier to understand, here are a few examples:

• All the farmers for a city graze their sheep in the same field. Eventually, if no one takes care of the field, or makes sure the sheep alternately graze elsewhere, then no one’s sheep will be able to use the field at all.
• A town shares a well that everyone has to use. But the water is a limited resource that will eventually run out.

Usually, another part of this scenario is that some people benefit more than others – those who are using more water or have more sheep, for example.

So why should I care?

You may be thinking that you’re not a farmer or someone who shares a well – so how could this possibly impact me? However, we all do share some common resources – like clean water – that there’s only so much to go around.  That’s why there are watering bans in the summer when we don’t get a lot of rain.

So if some people are selfish and still water their lawns or wash their cars daily, then there may not be enough water to go around for people who truly need it to support their livelihood or simply to meet their daily needs.

How does society deal with this?

Usually, society deals with this in one of two ways:

1. Regulatory – laws or by-laws are crafted to ensure no one person or company can over-consume a resource.
2. Collective agreement – if several people or companies need to share a resource, they work out an agreement on how to each only use their fair share.

Have you ever been in this kind of situation?

Ever run into a tragedy of the commons situation in real life? Let me know about it in the comments!

My inspiration for this series is a great podcast from NPR called Planet Money.  This summer, they did what they call “Planet Money Summer School“.  I decided to do some blog posts based on these topics.

This is part 3 in my series called “Economics 101”. If you’re interested, you can start with

• Part 1- Sunk Costs and Opportunity Costs
• Part 2 – Supply and Demand

In this post, I’m going to talk about elastic and inelastic demand.

 What exactly is the “elasticity” of demand?

The elasticity of demand refers to whether the demand for an item is flexible – that is, it will go up or down, depending on what it costs or how much income people have.

An “elastic” good would be a luxury item such as a high-end car. It can also be a “brand name” cereal – where a “no-name” option can be easily substituted.

An “inelastic” good is something people need regardless of how much the price goes up or income goes down – such as prescription drugs.

What are some samples of inelastic goods during the pandemic?

I mentioned it in a previous post – toilet paper! Also, things like sanitizing wipes and even hand sanitizer became in-elastic goods during the pandemic. Unfortunately, many people took advantage of this – and cleared out shelves, then tried to re-sell the goods at a higher price.  Hopefully, this didn’t happen to you – if you were short something, you had a friend or family member who could help you. I was lucky to have a friend who makes masks and gave me several free of charge.

What’s a sample elastic good?

That would vary from person to person. We bought a lot more snacks in our family – but didn’t eat out for a month.  We also didn’t buy any toys or books for ourselves or our son at all. We were lucky enough not to have our income drop, so it wasn’t a matter of our income dropping – we had nowhere to buy anything and no need to leave the house.

For others who had to deal with a loss in income, they may have bought cheaper meals (e.g. beans instead of rice) or switched to generic brands to save money on food and other products.

How were you impacted?

Now that you know what elastic vs. inelastic means, tell me about something in your life that you consider either an elastic or inelastic good!