Think of three goods for which the demand is inelastic with respect to price. Do these...

Think of three goods for which the demand is inelastic with respect to price. Do these goods ever go on sale? Does understanding the relationship between elasticity and total revenue help you understand why some goods go on sale and others don’t? Share your thoughts.

Expert Solution

a.

Demand for goods said to inelastic where a change in the price of the goods or by a change in the income of the consumer does not have a significant impact on their demand.

b.

Example for inelastic:

Salt
Petrol
Water

c.

Yes, all the goods exampled above go on sale on regular basis. The change in their price does not impact the demand for these products significantly.

d.

Yes, understanding the relationship between elasticity and total revenue helps me to understand why some goods go on sale and others don’t.

The relationship between elasticity and total revenue:

Revenue of a firm is simply the sale volume they have achieved in terms of dollars

For those goods whose demand is elastic in nature, an increase in their prices causes a reduction in total revenue of the firm and vice a versa.

For those goods whose demand is inelastic in nature, an increase in their prices doesn't cause any significant reduction in the total revenue of the firm.

ekkarill92 answered 2 years ago

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