1. 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 without any close substitutes is likely to have relatively demand, since consumers cannot easily switch to a substitute good if the price of the good rises. 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?

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1. 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 without any close substitutes is likely to have relatively
demand, since consumers cannot easily switch to a substitute good 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?
O Yacht
O Amputation procedures for diabetes sufferers
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.
Categories
Most Elastic
In Between
Least Elastic
Food
Red bell peppers
Vegetables
The price elasticity of demand is also affected by the given time horizon.
Compared to the short-run demand for oil, the demand for oil in the long run will tend to be
elastic.
Transcribed Image Text:1. 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 without any close substitutes is likely to have relatively demand, since consumers cannot easily switch to a substitute good 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? O Yacht O Amputation procedures for diabetes sufferers 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. Categories Most Elastic In Between Least Elastic Food Red bell peppers Vegetables The price elasticity of demand is also affected by the given time horizon. Compared to the short-run demand for oil, the demand for oil in the long run will tend to be elastic.
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