Question

What are four items in which demand is seen as inelastic with regards to price? Do any of these items go on sale? How does understanding the relationship between elasticity and total revenue help a person understand why certain goods go on sale and while others don't?

Answer 1

Demand of neccessaries like salt, kerosene oil, matchboxes, textbooks etc have inelastic demand. Goods to which person become accustomed or habitual will have inelastic demand like coffee, tobacco, cigarette, etc. Goods on which a consumer spends a very small proportion of his income eg. toothpaste, boot-polish, newspaper, needles, etc will have an inelastic demand.

All of these items are sold in the market.

Inelastic goods are those goods whose demand does not change with increase in the price of good. This increases total revenue of sellers by selling those goods who are inelastic in nature like cigarettes, tobacco, neccessary goods, newspaper, etc.

On the other hand, elastic goods are those goods whose demand decreases with slight increase in the price of good. This reduces total revenue of sellers who are selling elastic goods like costly furniture, airconditioner, fashionable garments, etc.