question archive Consider the following pairs of goods
Consider the following pairs of goods
Subject:EconomicsPrice:2.88 Bought3
Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic?
a. water or speedboats
b. blood pressure medicine or nasal decongestant spray
c. ice cream or food in general
d. gasoline over the course of a week or gasoline over the course of a year
e. cars or BMWs
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
You can find below the answers with the explanation of each answer.
a. water or speedboats.
Speedboats have a demand that is more price elastic. This is based on the degree of necessity. Water is a necessary good and therefore, its demand is inelastic. On the other hand, speedboats are a type of luxurious good, which has an elastic demand.
b. blood pressure medicine or nasal decongestant spray
Nasal decongestant sprays have a demand that is more price elastic. This example is similar to the previous one. Blood pressure medicine is a necessary good, which is more essential than a nasal decongestant spray. Additionally, nasal decongestant sprays have more substitute products than blood pressure medicine, which makes demand more price elastic.
c. ice cream or food in general
Ice cream has a demand that is more price elastic. Ice cream is not as necessary as food in general, which makes its demand more price sensitive. In contrast, food in general is essential for people and, therefore, its demand is more inelastic.
d. gasoline over the course of a week or gasoline over the course of a year.
Gasoline over the course of a year has a demand that is more price elastic. One factor that affects the price elasticity of demand for a product is the time period of the change in price. The demand is more price elastic when the period is longer since consumers have time to look for substitutes.
e. cars or BMWs.
BMWs have a demand that is more price elastic. Another important factor that determines the price elasticity of demand for a product is the percentage of consumer income used to purchase the goods. Based on the theory, products that take more portion of the consumer income have a higher price elasticity of demand.
