Compare given examples below and compare demand for these goods regarding elasticity. Which one is elastic,...

Compare given examples below and compare demand for these goods regarding elasticity. Which one is elastic, inelastic, unit elastic? Reason, explain. For each example, which determinants of elasticity of demand is affected?

Bicycle pump versus Continental bicycle pump
Fruit mixer versus dishwasher
HIV medication versus Vitamins
Car versus bus

Solutions

Expert Solution

Branded goods are elastic in nature when compared with unbranded as people would be sensitive for price changes for branded goods.

Luxury goods are elastic in nature when compared with basic or necessity goods as people would be sensitive for price changes for luxuries.

Sl.No	Good	Nature	Good	Nature	Reason
a.	Bicycle pump	Inelastic	Continental bicycle pump	Elastic	Continental bicycle pump is a luxury good when compared to bicycle pump
b.	Fruit mixer	Inelastic	Dishwasher	Elastic	Dishwasher is a luxury good when compared to fruit mixer
c.	HIV medication	Inelastic	Vitamins	Elastic	HIV medication is a necessity good when compared to fruit mixer
d.	Car	Elastic	Bus	Inelastic	Car is a luxury good and bus is a basic

Determinants of elasticity of demand includes price of own good, price of substitutes and complements, income, preferences etc. Among them price of own good is the one which affects the elasticity of demand the most.

Rahul Sunny answered 1 year ago

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