Question

From a union’s perspective, is it preferable to produce a good or service with an elastic demand or inelastic demand? Explain.

Answer 1

Unions are democratic forms of organisations that strive to work towards collective benefit of a group of individuals by collectively generating or acquiring required goods and services.Now, if a good or service has a high elasticity of demand, it is considered as a luxury since its demand is flexible enough to get postponed at a later date when its price gets lower.

On the other hand, if a good or service has an inelastic demand, it is considered as a necessity since its demand is not much enough to get postponed at a later date when its price gets lower.

In such a scenario, a union prefers to produce goods with inelastic demand as it serves interest of more individuals by providing them the required scarce resources at substantially lesser price.