1. A good without any close substitutes is likely to have relatively _______? de
ID: 1169438 • Letter: 1
Question
1. A good without any close substitutes is likely to have relatively _______? demand, because consumers cannot easily switch to a substitute good if the price of the good rises.
2. A good’s price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the least elastic demand?
a. Sports car
b.Amputation procedures for patients with diabetes
3. Price elasticity for a good depends on the share of a consumer's budget spent on a good. Other things being equal, which of the following goods has the most elastic demand?
a.Toothbrush
b. TV and Internet service plan
c. Lightbulbs
Explanation / Answer
1. A good with no or lesser number of close substitutes will have inelastic demand. The people will have no choice of shifting their preference to other close substitute in case of price rise. That means that the price rise or fall will have negligent effect on the demand for the commodity if there are no substitutes available in the market.
2. Buying a sports car is less necessary than undergoing amputation procedure which if not done will cause harm to life. The demand for amputation procedure will not depend on the price of the treatment as its a necessity whereas demand for sports car will be more elastic as compared to amputation procedure.
3. The percentage of expenditure on TV and internet service plan will be relatively more than the amount spent on lightbulbs and toothbrush. This means that TV and internet service will have elastic demand than toothbrush and Lightbulbs.
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