A good without any dose substitutes is likely to have relatively inelastic deman

Question

A good without any dose substitutes is likely to have relatively inelastic demand, since consumers cannot easily switch to a substitute good if the price of the good rises. Price elasticity of demand for a good depends in part on how one defines the good. Of the following categories, which one has the least elastic demand? Bell peppers Red bell peppers Food Vegetables If the price of gasoline is relatively high for a long time, consumers are more likely to buy more fuel-efficient cars or switch to alternatives like public transportation. Therefore, the demand for gasoline is elastic

Explanation / Answer

Price elasticity of demand is the degree of response of quantity demanded of a commodity to a change in its own price. Elasticity is least when the consumer is not likely to change his/her demand and is highest when the consumer is willing to alter demand at even the slightest change in the price. Answer 1 A good without any close substitutes is likely to have relatively inelastic demand since the consumers cannot easily switch to a substitute good if the price of the good rises. Answer 2 The elasticity of a whole category of commodities is the least and that of 1 specific commodity is the highest. In this case, food is a general category of commodities which cannot be substituted by anything else, thus it has the least elastic demand. The elasticity in ascending order will be as follows: Food - Category including all edible items Vegetables - Category including a part of edible items, can be substituted upto a limit Bell Peppers - Category of a vegetable which can be substituted for some other vegetable Red Bell Pepper - One specific type of vegetable which can be easily substituted by the consumer with any other type of the same vegetable or by some other vegetable or by any other food category Answer 3 The demand for gasoline will be less elastic in the short run than in the long run because in the short run, consumers do not have any substitute for gasoline thus they cannot alter their demand much. However as given in the question, in the long run the consumers can find alternatives and thus would be able to alter demand.

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