Question

. What will make a product's demand more inelastic, and what is the impact on the consumer of inelastic demand? WHAT IS THE DIFFERENCE BETWEEN DEMAND AND QUANTITY DEMANDED? DOES DEMAND AFFECT CONSUMER BEHAVIOR OF VICE-VERSA? WHEN WILL A CHANGE IN PRICE AFFECT DEMAND?

Answer 1

Below factors will make a product's demand more inelastic

1. Nature of Goods- Refers to one of the most significant variables in determining the price elasticity of demand In economic goods, necessities (or vital products), comforts and luxuries are categorized into three categories. Any shift in luxury goods prices is causing a significant shift in their demand. Furthermore, the price elasticity of comfort demand, such as milk fan and coolers, is equivalent to unity. We can therefore conclude that comfort demand is more elastic than necessities and less elastic than luxury goods. However, this declaration is not always accurate as demand for luxury goods in reduced and medium income groups may be elastic, but may be inelastic in the upper class.

2. Availability of Substitutes- Influences to a greater extent the elasticity of demand. The primary reason for changing demand elasticity with price changes for some products is the availability of their competing replacements. The greater the number of close replacements of a good on the market, the greater the elasticity for that good. Tea and coffee, for instance, are close substitutes. If the price of tea rises, consumers may curtail the consumption of tea and purchase coffee and versa. In such a case the demand for tea decreases, while demand for coffee increases. Therefore, the elasticity of demand for both of these goods would be higher

3. Distribution of Income- Acts as a key factor in affecting demand's price elasticity. If a customer has a large revenue, then it would be inelastic to demand products that he / she consumes. For instance, an rise in any goods prices would not influence a millionaire's demand for products. On the other side, demand for products consumed by customers of reduced or medium income would be extremely susceptible to price changes. For example, if the price of mobile phones increases, the demand for mobile phones in high-income groups would be inelastic, whereas in lower and middle-income consumers it would be highly elastic.

A tax shifts the supply curve to the left, resulting in a greater cost and a drop in demand.

If demand is inelastic, the tax will result in a significant price increase and a slight reduction in amount. This will assist boost the government's tax income.

Cigarettes tend to have inelastic demand; when the state raises a tax, companies are generally able to pass the entire rise on to customers.

The fundamental difference between demand and quantity demanded is that while demand simply denotes the willingness and a person’s ability to purchase. As against this quantity demanded represents the amount of an economic good or service desired by consumers at a fixed price. Changes in demand are due to the factors other than price, i.e. income, the price of complementary goods, the price of substitutes, etc. On the other hand, changes in quantity demanded is due to price.

The law of supply and demand demonstrates the relationship between supply, demand and prices. As demand drives upward, so do the prices. This relationship attracts more suppliers, serving to not only stabilize the prices but also to keep the demand at healthy consumer levels. Supply and demand affect consumer behavior because if a product is too expensive, consumer demand for that product will decrease. The quantity of a particular good or service that a consumer or group of consumers want to purchase at a given price is termed as demand. It is the consumer’s ability or willingness to buy a specific product. The demand curve is downward sloping which means the consumers will buy more when the price decreases and the same consumers will buy less when the price increases. It is not only price, the demand for a good or a service is also influenced by other factors such as the price of substitute goods and complementary goods.

The demand function is dependent on quantity, and the result of which will be the price. The utility function and budget constraints are the same. On the other hand, if there is another impact on demand, which is not the quantity, let's say a health trend, then the entire demand function will change and meet the supply for health food at a higher place The utility function will change and budget constraints will be the same.

High prices discourage spending, but increase supply and will force prices to return downward slightly until a consumer equilibrium occurs. This equilibrium is when consumers feel that the demand for the product justifies the price.