Question

Determinants of the price elasticity of demand 

Consider some determinants of the price elasticity of demand: 

The availability of close substitutes . 

Whether the good is a necessity or a luxury 

How broadly you define the market . 

The time horizon being considered 

A good with many close substitutes is likely to have relatively _______  demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises 

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 most elastic demand? 

A heart valve for heart attack victims 

Yacht 

The price elasticity of demand for a good also depends on how you define the good 

Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between 

The price elasticity of demand is also affected by the given time horizon.

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 in the short run than in the long run.

Answer 1

Good with close subsitutes- elastic demand

Yatch- is most elastic as Yatch is not a necessary good.

Red bell peppers- most elastic

food- least elastic

vegetables- in between

demand for gasoline is less elastic in the short run than in long run.