in the follow pairs, ticks which of the two items is likely to have the more...

in the follow pairs, ticks which of the two items is likely to have the more elastic demand. Giver reason for your answer a. gasoline (all brands ) vs shell gasoline b. holiday abroad vs bread c. salt vs clothing

Solutions

Expert Solution

More elastic demand - A small change in price will have a greater effect on demand. Decrease in quantity will be greater than the increase in price. This may be due to easy availability of substitute or less tolerance of customers to price change.

a. Shell gasoline

If price of gasoline increases, quantity will fall slightly because there are no close substitutes for gasoline and people will still need fuel even if the price increases.

If price of shell gasoline increases, fall in quantity will be more because people have other brands to switch. So shell gasoline has more elastic demand.

b. Holiday abroad

If price of holiday abroad increases, quantity will fall more because people can substitute with cheap holiday places.

If price of bread increases, quantity will fall slightly as there are less substitutes for bread.

c. Clothing

If price of salt increases, quantity will not fall beacuse they cannot reduce the daily intake of salt.So demand for salt is inelastic.

If price of clothing increases, quantity will fall more compared to salt.

Rahul Sunny answered 1 year ago

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