Name a relatively inexpensive product that you purchase on a regular basis. If t

Question

Name a relatively inexpensive product that you purchase on a regular basis. If the price of that product increased by 25% how would you react? Why? Is your response considered to be ELASTIC or INELASTIC?

Now name a relatively expensive product that you purchase less frequently. If the price of that product increased by 25% how would you react? Why? Is your response considered to be ELASTIC or INELASTIC?

Let's consider the price of gasoline. It has been changing a lot over the course of the last few years. How have you responded to these changes? Explain your reaction to the price change in terms of it being either elastic or inelastic.

Would you react differently if you believe that increased gas prices will be temporary (short run) as opposed to being a long run phenomenon? How so and why?

Explanation / Answer

In this case we can consider toothpaste as a relatively inexpensive product that I purchase on a regular basis. If the price of that product increased by 25% I would still buy the toothpaste even at this higher price. The main reason for this is that it is an essential hygienic need for my teeth and that not using toothpaste may cause me serious physical problems with my teeth as well as social ones too. My response would be considered inelastic since a change in price has hardly affected by demand for the good.

A relatively expensive product that you purchase less frequently would be a laptop computer. If the price of that product increased by 25% how would you react I would definitely start considering other options such as a desktop computer since 25% of the price of a laptop computer would amount to a greater percentage of my income as opposed to a 25% price increase in toothpaste as mentioned before. This sort of response would be considered elastic since I'm willing to potentially trade of getting a laptop for something else such as a desktop instead.

The price of gasoline changing over the past few years has not changed me from being inelastic to elastic. No matter what I must purchase gasoline to get to work, so although I would prefer other methods of transportation my need for gasoline still remains inelastic no matter the supply and cost, assuming its within a reasonable range of course.

If I believed increased gas prices would only be temporary rather than long term than then yes I would react differently. In that case I would conserve more gasoline during this short term period and wait it out until the prices finally drop back down. This would ultimately save me more money since it would only be a temporary spike in cost.

Hope this helps, good luck.

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.