Elasticity and Income

Lately I have really been noticing the effects of the economy on the lives of my family, friends, and boyfriend. Last month, my boyfriend sold his gas-guzzling F250 truck to buy a more fuel efficient Honda Civic. This was such a big chance in vehicles for him but he just got a five percent pay decrease at work so he is making the financial adjustments he needs. With a lower income, he can not afford to pay for the amount of gas that truck takes, but he is still willing to go out on dates with me and spend money at the theatre and at dinner. The F 250 truck is a luxury good for my boyfriend and therefore has an elastic demand to him whereas spending money on dates with me is inelastic. The truck also has a close substitute, the Civic, to switch to. The decrease in his pay drove him to purchase a near substitutes to make up for his losses. My boyfriend also has an opportunity cost in this case too though. His opportunity cost of still being able to spend money on dates or activities we do together is the cost of giving up his truck to settle for a vehicle of little importance to him. 

Another issue I have seen recently in my family was the affects the economy took on my uncle when he got laid off from his job this year. He is the main source of income in the household and has two kids. He can collect unemployment for about 6 months but he had to start cutting back on many things. He used to shop at an expensive organic grocery and now he shops at a local supermarket and buys generic brand food. He has to use substitutes to cut back and save on money. For example, Cereal and toilet paper. He does not buy the expensive name brands of cereal like general mills or kelloggs anymore but instead substitutes for the generic brands and economy-size bags that contain more for less. With toilet paper he does not buy the soft, ultra thick brand name stuff but the cheap dollar store kind now. He also has to reduce his spending on luxury items like electronics, movies, and designer clothing. These things are not necessities like food. Food is inelastic because it is a necessity and even though there are cheaper substitutes, he will never completely cut food out of the spending budget. These are just a couple things I have noticed that have reminded me of econ class lately.