Question #58042
In each of the following cases, indicate which good you think has a relatively more price elastic demand and identify the most likely reason, in terms of the determinants of the elasticity of demand (more substitutes, greater share of budget, or more time to adjust).a. cars or Chevrolets b. salt or housing c. food or rice d. natural gas this month or over the course of a year
Expert's answer
In each of the following cases, indicate which good you think has a relatively more price elastic demand and identify the most likely reason, in terms of the determinants of the elasticity of demand (more substitutes, greater share of budget, or more time to adjust).a. cars or Chevrolets b. salt or housing c. food or rice d. natural gas this month or over the course of a year
Cases:
a) cars. They have more substitutes than Chevrolets only.
b) housing. Greater share of budget than salt.
c) food. Food includes rice, so it has more substitutes than rice only.
d) natural gas over the course of a yea. Because consumer has more time to adjust.
Cases:
a) cars. They have more substitutes than Chevrolets only.
b) housing. Greater share of budget than salt.
c) food. Food includes rice, so it has more substitutes than rice only.
d) natural gas over the course of a yea. Because consumer has more time to adjust.
