Elastic VS Inelastic

For many years now, whenever I shop for a pair of bermudas for casual wear, one of my concerns are always whether the waistband is elastic or inelastic. I always look out for bermudas that are elastic as I know if my waist line increases then there is more room for expansion. With elastic waistband I can eat more during buffets. If I put on wait I do not have to immediately run out and start buying new pants. If only somebody can design work pants that are also elastic yet look professional will be ideal. I can still remember the times when I bought Levi's jeans with waistline 32... today I struggle with a 38.. so elasticity is key in my choice.

In economics, whether the demand for an item is elastic or inelastic will determine how much price will affect the demand of it. Meaning if the demand for an item is inelastic, no matter how high the price the demand will still be there. Just like my bermudas if waistband not elastic then when waitline increase then will have to buy knew ones, no choice...

But of demand for a good or item or service is elastic then with increase in prices then demand will drop. Just like the case of my elastic waistband bermudas, if the waistline increase it does not matter I just have shorter strings to tie but still can wear for some time.

We have been taught that some of the things that has inelastic demand are cigarettes, alcohol, healthcare and probably funeral services. There probably are more but these are blatant examples. As you can see cigarettes have increased in price from a mere $3.50 in my first memory to about $11.00 today yet there is no lack of smokers. Same as alcohol and I do not have to say much about healthcare and funeral services.

But in Singapore, I have noticed that there are 2 other items that has also inelastic demand, cars and property. Its amazing how much people will pay for a piece of paper that is only valid for 10 years and you cannot even wipe your backside with after the 10 years. That piece of paper coast about $80,000 today. But when you ask the same people to set side $8,000 per year for the next 10 years for a potential return of 5% they think I am crazy.... 

$80,000 buying a COE, value after 10 years = $0

$8,000 set aside per year @ 5%, value after 10 years = $100,623

But of course I do agree that having a car is a necessity especially if you have kids and all.

I read about how LTA came up with the COE scheme and all because they use behavioural economics. Read all about the report here. They used chocolates as example to justify the need to charge for zoning of restricted zones and all. Chocolates and congestion what is the relationship!!?? The rationale is that if you have free chocolates, people will take the free chocolates but if you have to pay for the chocolates then less people will take.

The research have been done on a very shallow basis without taking into consideration of many other factors. For example the culture and tradition of Singaporeans. Singaporeans are still very much conscious about face and status. And 2 of the items that can fully express your status is a car and a big property or the number of properties you own.

I remembered that when I was younger my grandmother use to tell me in hokkien: more important to have big car then big house cos more people can see the car but not the house. 

So because of face many will still buy a car as a status symbol. And not any ordinary car but a big one. In Marketing there is something called the perfect price discrimination strategy, people like Toyota has come out with their luxury brand Lexus, so that they can capture all the market. On a budget buy Toyota, want to express status buy a Lexus. That is exactly how our COE is heading and yes that should be it.

But what I cannot fully comprehend is the need to have Motorcycle category. Ok so its a perfect price discrimination strategy so we also charge motorcycles but in the latest COE bidding it has been raised to $2700 up by 30%! Why? Are motorcycles now causing the congestion? But Tang relative to a car still cheap what? Yes but its the principal, the principal of COE is reduce congestion but motorcyclist taking less space on the road causing almost no congestion (unless in an accident) is slapped with higher COE? 

Ok I am somebody driven by principal and that is also why there is an internal struggle now for me to purchase a Sony PS4. I had chose to purchase a Sony PS3 in the past because they never charged for online gaming but the Xbox 360 did. But with the launch of the PS4 online gamers has to purchase a subscription.... contemplating switching back to PC....

Anyway, LTA should think out of the box to solve their congestions rather than just taking money.... unless they have already understood the inelasticity of Singaporeans car demands.