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In: Economics

why is the price elasticity of demand larger for non-essential goods than for essential good?

why is the price elasticity of demand larger for non-essential goods than for essential good?

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Expert Solution

Price elasticity of demand is an indicator of the impact on the demand for a product in relation to its price change. Non-essential goods have a high elasticity of demand, while essential goods or consumer staples have a low elasticity of demand.

Consumer staples are a sub-category of consumer goods that are regarded as essential products. Examples of this include food, beverages, and certain household goods. Non-essential goods, on the other hand, are products that are not absolutely necessary. Examples of non-essential items that consumers spend money on are impulse purchases, dining out, jewelry, and electronics.

Essential goods have a low elasticity of demand. There will always be a need for consumer staples and a change in price is unlikely to impact demand. On the other hand, the demand for non-essential goods can fluctuate greatly. The demand can plummet depending upon the economy and the overall financial situation of consumers. Because of this, non-essential goods have a high elasticity of demand.

Rahul Sunny answered 2 years ago
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