Why does a toothbrush have an inelastic demand and an automobile have an elastic demand? Explain...

Why does a toothbrush have an inelastic demand and an automobile have an elastic demand? Explain the underlying economic intuition.

Expert Solution

Ans The toothbrush have the inelastic demand because toothbrush is a necessary good and we know that necessesity good consumption is never affected by change in its price , so the demand of necessary good is not affected by change in its price ,even if the prices increases too much we can't reduce its consumption. When percentage change in prices have no effect on quantity demanded than we face an inelastic demand curve that is parallel to y axis .

An automobile is a Luxary good that is those who have enough money or wealth have the ability to buy automobile , not everyone have such Luxary to buy automobile. The demand for Luxary goods increased with increase in income , also with decrease in prices of that good leads to increase in its consumption . So any decrease in price of automobile will increase it's purchase which means automobile sale is highly affected by change in its price. So that's why it's demand curve is elastic and parallel to x - axis .

Rahul Sunny answered 2 years ago

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