Question

In: Economics

A good with many close substitutes is likely to have relatively demand, since consumers can easily...

A good with many close substitutes is likely to have relatively demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises.

A good’s price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the least elastic demand?

A home heating system in Canada

Diamond necklace

The price elasticity of demand for a good also depends on how you define the good.

Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between.

Categories	Most Elastic	In Between	Least Elastic
Food
Red bell peppers
Vegetables

The price elasticity of demand is also affected by the given time horizon.

If the price of gasoline is relatively high for a long time, consumers are more likely to buy more fuel-efficient cars or switch to alternatives like public transportation. Therefore, the demand for gasoline is elastic in the short run than in the long run.

Expert Solution

A good with many close substitutes is likely to have relatively elastic demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises .

A good’s price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the least elastic demand?

A home heating system in Canada : Lesser elastic because it is a necessity in cold wintry weather in Canada .

Diamond necklace : More elastic because it is a luxury product .

The price elasticity of demand for a good also depends on how you define the good.

Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between.

Food	Least elastic ( because it is a necessity )
Red bell peppers	Most elastic ( because it can be replaced with bell peppers of other colors easily )

Vegatables In between ( fewer substitutes and kind of necessary )

The price elasticity of demand is also affected by the given time horizon. If the price of gasoline is relatively high for a long time, consumers are more likely to buy more fuel-efficient cars or switch to alternatives like public transportation. Therefore, the demand for gasoline is inelastic in the short run than in the long run .

(In long run people find substitutes , hence demand for gasoline becomes very elastic . )

Rahul Sunny answered 1 year ago

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