Question

19-9. Based solely on the information provided below, characterize the demands for the following goods as being more elastic or more inelastic.

A. A 45-cent box of salt that you buy once a year

B. A type of high-powered ski boat that you can rent from any one of a number of rental agencies

C. A specific brand of bottled water

D. Automobile insurance in a state that requires autos to be insured but has only a few insurance companies

E. A 75-cent guitar pick for the lead guitarist of a major rock band

Answer 1

Answer Elastic demand is that demand in which percentage change in price bring greater percentage change in quantity demanded and inelastic demand is that demand in which percentage change in price bring lesser percentage change in quantity demanded.

A) . A 45-cent box of salt that you buy once a year- In this , price elasticity of demand is inelastic. The reason is that salt is necessity and increase and decrease in price have no impact on quantity demanded of salt.

B. A type of high-powered ski boat that you can rent from any one of a number of rental agencies. In this case price elasticity of demand is more elastic.

C. A specific brand of bottled water. In this case price elasticity of demand is more elastic. The reason is that bottled water has substitutes.

D) Automobile insurance in a state that requires autos to be insured but has only a few insurance companies. In this case price elasticity of demand is more inelastic. The reason is that there are few insurance companies. Where the charge high price, automobile insurance will be done from them only.

E. A 75-cent guitar pick for the lead guitarist of a major rock band.  In this case price elasticity of demand is more inelastic.