Chapter 7, Problem 14AA

To determine

To evaluate: The comparison between the elastic and inelastic demand.

Explanation of Solution

Demand elasticity, refers to the changes in the product purchase due to the changes in the price. This is generally referred to as market price elasticity, because price is the most important economic factor used to calculate market. Whereas the demand for an inelastic goods is characterized as one where there is no major change on the want for that commodity from a shift in the product price. Therefore, when the rate of a product price rises and the consumers purchasing habit remain the same. The same happens when price drop. In short can be said that the consumer want for a good or service remains unaltered , demand is said to be inelastic even when the price increases. Examples of elastic products include oil, while things such as food and prescription drugs are inelastic products.

Economics Concept Introduction

Introduction:  Demand elasticity helps businesses anticipate demand changes based on a variety of different factors including price fluctuations and the entry of new products into the market.