Why different goods have different price elasticities?


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Jack Buckby answered
All goods have a different price elasticity. The price elasticity can show how the price of a particular kind of good will be affected by demand. For instance, if demand increases, some goods will experience an increase in price in order to generate a large profit. Some goods may go the other way. It depends on the kind of good you are talking about - for instance, inferior goods and luxury goods. There are so many different kinds of goods, and all of them react differently to changes in the market. This is why price elasticity, or PED (Price elasticity of demand) was created.

  • Inferior goods

Within the realms and study of consumer theory, an inferior good is a thing that experiences a lowering in demand when the income of the market base increases. This means that when people are earning more money they will buy less of this kind of item. For instance, when people are experiencing a more fruitful income, they may be less inclined to buy cheap foods. For instance, cheap brands of food can be considered an inferior good. Maybe even orange cordial.

Orange cordial and other cordial drinks are classic examples of inferior goods. When people are earning more money they may instead start purchasing freshly squeezed pure orange juice, or maybe even large bottles of fizzy drinks.

  • Normal goods

A normal good is very different. A normal good is a product or a service that sees an increase in demand when the income of the market base increases as well. A normal good, however, will also see a decrease in demand then the general income of the market base reduces. They act as you would expect a regular product to act on a market. They basically just correspond with the income of the people.

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