Question

Give an example of a good you purchased for which your own demand is elastic and another example of a good for which your demand is inelastic.  (Tip: if you are having a tough time thinking of products or services you bought, think back to your purchases within the last 3 months. See example in Point 1 below.)

Share with the class:

1.What two products or services did you buy? State whether they are elastic or inelastic, estimate their elasticity coefficient and explain why they are elastic or inelastic. (example: Honda car, Elastic, 4.0 – I shopped around for the best model of car for the price. Medical care, Inelastic, 0.2 – when I am sick I must go to a doctor in order to feel better, so the price is not an important factor)

2.Do you consider yourself to be price sensitive?   Give a rating on a scale of 1 to 10, with 0 = not price sensitive at all and 10 = extremely price sensitive.  Explain why and provide an example.

3.Suppose your income at the time you purchased these items now suddenly tripled e.g. went from $30,000 to $90,000 annually. Would you still buy the same items or something else? If so, what would you buy?  

4.Based on your answer in #3, does that make your items inferior or normal goods?

5.For fun, imagine you are now one of the Kardashians. State which one you are (e.g. Kim, Khloe, Rob, etc).  Would they buy something else instead of your original purchase? What would the Kardashian purchase instead?  (For instance, say you bought a pair of Levi jeans. I'm guessing but I don't think that Kardashian would be seen in a pair of Levis. So, instead, they bought a Gucci brand instead! Have some fun with this!!)

Answer 1

Answer 1.

Second hand Laptop , demand is elastic as I wanted to buy best laptop for the price.

Airline tickets, demand is inelastic as it is a necessity for me to travel to my hometown.

Answer 2. Yes I am price sensitive. I would give myself a rating of 7. The price of goods matters to me as I am a student my income is not much.

Answer 3. If my income doubled, I would buy apple macbook but would buy the same airline tickets.

Answer 4. Second hand Laptop is inferior good because when income rises my demand for second hand laptop falls. Airline ticket is normal good when income rises I can buy tickets more frequently.

Answer.5. Kardashians would probably use private jet to travel and Macbook (apple laptop).