What Are The Major Determinants Of Price Elasticity Of Demand? Use Those Determinants And Your Own Reasoning In Judging Whether Demand For Each Of The Following Products Is Elastic Or Inelastic.

3 Answers

David Gill Profile
David Gill answered
Elasticity of demand is used to measure the reactions of market demand when a price is changed. The major determinants regarding the Price Elasticity Of Demand are that price will more than likely be affected when similar products are available and increased competition is present.

Inelastic demand means a change in price causes a smaller percentage change in demand. It means people are unresponsive to any changes in price.

A. Bottled water;

Demand on water would likely be classed as elastic as there are a variety of other drinks on the market. Although water is a necessity for life, we can simply turn on the faucet and get a drink.

B. Toothpaste;

There are alternatives such as dental floss and mouthwash, but rather than being substitutes for toothpaste they're more like add-ons. Toothpaste is deemed the most effective way of preventing tooth decay.

C. Crest toothpaste;

There are many different brands of toothpaste on the market. A significant price increase would likely see customers, even brand-loyal customers switch to another equally trusted brand.

D. Ketchup;

Ketchup is not something that you have to have, unless you suffer from some strange food fetish, so changes in price could see people switch to some other condiment.

E. Diamond bracelets;

Someone will buy a status symbol like this in order to show they have money and so the cost will more than likely be incidental to the desire for the item.

F. Microsoft Windows operating system.

There are already freely available operating systems such as Linux and Ubuntu, yet Microsoft Windows still boasts market share. Technological awareness and convenience is prominent in the elasticity of demand here.
Aisha Profile
Aisha answered
Following are the determinants of price elasticity of demand:
Number of substitutes
Degree of necessity
Price of the good as a proportion of income
The answer for the second part is as follows:
A. Bottled water--Elastic
b. Toothpaste --Elastic
c. Crest toothpaste--elastic
d. Ketchup-Elastic
e. Diamond bracelets-- Inelastic
f. Microsoft Windows operating system. Inelastic

Answer Question