In: Economics
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?
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.