Question

DQ #1: For each of the following pairs of goods or services, identify the one for which price elasticity of demand is greater and explain why. - Coffee/ Starbucks Coffee -Tuition at a public university/ tuition at a private university -Emergency room medical service/ annual physical exam - Movies in the afternoon/ movies at night - Prescription medicine/ over-the-counter medicine

Answer 1

1) Demand for Coffee is greater elastic than demand for Starbucks coffee. If price of coffee rises, then consumers can substitute coffee for tea or some other beverage. But, Starbucks is a brand in itself. It charges higher prices due to it's quality. So, consumers will pay higher price for Starbucks coffee due to it's quality and brand name. So, it's demand is inelastic.

2) Tution at public university has greater elasticity than demand of tution at private university. If price of tution at public university rises, then consumers will prefer private university. So, demand is highly elastic in case of public universities. On the other hand, private university charges higher fees for the quality and facility it provides. So, consumers are ready to pay any price for them. Their demand is inelastic. h

3) Annual physical exam has greater elasticity than emergency room medical services.Consumers are ready to pay any amount for emergency situations. On the other hand, their demand for annual physical exam is elastic. They will avoid such annual physical exam if it's very costly.

4) Consumers are particularly fond of watching movies at night and are ready to pay higher price for night shows. So, their demand is inelastic. However, many consumers don't like to watch afternoon shows and if the afternoon show price increases, they will shift their demand. So, demand for movies in the afternoon is highly elastic.

5) Prescription Medicines are particularly prescribed by doctors for specific symptoms. So, they have inelastic demand. They have to be purchased by consumers irrespective of their prices. However, over the counter medicines have many substitutes so, they have elastic demand.

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