In the case of certain goods like gasoline or milk, inelastic demand will almost always be present since these goods have become essential in one sense or another. However, consumers are left exposed to arbitrary price inflation and price gouging which have a host of negative outcomes. The California Energy Crisis of 2000-2002 is a good example, as energy companies like Enron and Reliant Energy (now GenON) exploited the inelastic demand for electricity to impose abnormally high costs to consumers for the sole purpose of increasing profits. It is for this reason that public ultities are often the most heavily regulated industries, and rightly so, because energy companies have no financial reason to dramatically increase energy costs to consumers since consumers will have to use their product. With non-commodity markets like labor, inelastic demand is also problematic. The U.S. market demonstrates the consequences of the unwillingess or inaction (on the part of the private sector) to create jobs at a rate to satisfy demand for them despite arguably favorable economic conditions.
Last Words
Inelastic demand is becoming more important to understand in regards to the lingering unemployment concerns here in the United States considering that it plays a critical role in the ability of American corporations to downsize their workforce repeatedly in the name of cost cutting. Until the government reaches an effective compromise on matters of fiscal policy and regulation, America's jobseekers will continue to see insignificant growth in job opening and hiring rates from the private sector.
Article comments
1 - Igor
The eager Econ student is referred to Paul Samuelsons excellent texts on Econ for understanding "Supply and Demand" (a subject that many claim there is a law for, but none tell me what it is, that elusive "law of supply and demand").