Answer to Question #290372 in Microeconomics for shanks

Question

For each pair of the following pairs of goods, which good would you expect to have more

elastic demand and why?

1)Fresh vegetables or chocolate -chip biscuits

2)Car or bicycle

Answer 1

For each pair of the following pairs of goods, which good would you expect to have more elastic demand and why?

The proportionate change in the quantity required divided by the corresponding change in price of the commodity is known as elastic demand. Elasticity changes along the demand curve for a linear demand curve.

1)     Fresh vegetables or chocolate-chip biscuits

Fresh vegetables are more elastic. This is because there are more substitutes in the market for fresh vegetables. If the price is raised, the consumers have an option to opt for other vegetables. This makes the demand for fresh vegetables to be more elastic. Chocolate-chip biscuits have few substitutes in the market. This makes its demand inelastic because if the price increases, the consumers have no other option but to continue consuming the chocolate-chip biscuits.

2)     Car or bicycle

A car is more elastic than a bicycle because a rise in the price of a given brand of the car gives the consumers option to choose other cheaper brands. This makes the demand for cars highly sensitive to price change. Bicycle is considered inferior goods, therefore, a drop in income causes an increase in demand for the bicycle.