Answer to Question #283538 in Microeconomics for Fazi

Question

What is price elasticity of demand? Do you expect the price elasticity of demand for the following goods to be elastic or inelastic? Elaborate your answer.

Beef and Chicken

Haircare products available in the market.

Apple Inc. products.

Insulin for diabetes patients.

Use of electricity.

Answer 1

Price elasticity of demand measures the responsiveness of the quantity demanded of a good due to a change in the price of the good.

Price Elasticity of the following;

Beef and Chicken is expected to be price elastic because an increase in the price of these products forces customers to go for substitutes and hence a decrease in quantity demanded.

Haircare products available in the market- It is expected to be price inelastic since with the current growing demand for beauty whether the price increases, the users still continue using so that they remain beautiful.

Apple Inc Products- it is price elastic since there are alternatives for similar products that can serve the same purpose and hence an increase in price will lead to a sharp decline in the quantity demanded.

Insulin for diabetes patients- This is price inelastic due to the scarcity of the insulin. This is because whether the demand increases the supply remains.

Use of electricity- This price inelastic because it is neccessity nad people have to use it and again in most cases it is supplied by a monopolist.