Question

Please list and describe a product or a service that is new and original--- not discussed in the Lectures or videos, and not eyeglasses. Is the demand for your product or service price elastic? Or price inelastic? Why? How do the six forces discussed in #1 apply to the product or service that you have chosen to discuss? In your example, what would happen if the seller or sellers raised the price of this product or service by 10%? Why?

Answer 1

Product/service chosed :- leased accomodation service (by any famous Broker of your country)

A product/ service is said to be Elastic when there is a change in demand due to change in any one of the forces of demands, keeping other factors as constant. ( say there is a change in price of the service) . As accomodation is a basic necessity of every person. Hence it is not sensetive to price change. No matter what every person will need a house to stay. Hence any change in the amount/price of the service provided(leased accomodation) will not lead to decrease in demand. As it is a necessity. Hence it is said to be inelastic. All forces of demands does have an impact on the demand. For example- if there is an increase in incomw, the elasticity in this case will increase as people can afford better accomodation . Hence it will lead to increase in demand than before.

Even if there is a 10% increase in price, people will opt for the leased accomodation, as it is a need. All goods/services that are of utmost need are price inelastic. Eg- food, medecine are also price inelastic.