For each of the following pairs of goods, which good would you expect to have more...

For each of the following pairs of goods, which good would you expect to have more elastic demand and why?

a) required textbooks or mystery novels?

b) Beethoven recordings or classical music recording in general?

c) gasoline during the next month or gasoline during the next year?

d) root beer or water?

Solutions

Expert Solution

Elasticity of demand is defined as the degree to which demand of a good changes due to the change in the price of the good. If the rate of percentage change of demand is higher than the rate of percentage change in price then demand is said to be elastic.
a)Required textbooks are a necessity and don't have close substitute. So they have inelastic demand
Mystry novel have close substitutes. So they have elastic demand
So, the demand of mystry novel is more elastic
b) Beethoven recordings have more elastic demand than classical music recordings in general. Beethoven recordings are a narrower market than classical music recordings, so it is easy to find close substitutes for them.

Therefore, Beethoven recordings have more elastic demand.
C) Gasoline during the next year has more elastic demand than gasoline during the next month. This is because goods tend to have more elastic demand over longer time horizons and inelastic demand over shorter time horizons.
D)Root water is a luxury with close substitutes. And Water is a necessity which doesn't have any close substitute.
So, the demand of root beer is more elastic.

Rahul Sunny answered 1 year ago

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