Based on only the information provided, characterize the demand for the following goods as being more elastic or more inelastic.
Part 2
a. A 45-cent box of salt that you buy once a year
Based on the information provided, it is not possible to determine the elasticity of demand for a 45-cent box of salt that you buy once a year. The elasticity of demand depends on various factors such as the availability of substitutes, the proportion of income spent on the good, and consumer preferences, which are not provided in the given information.
The price elasticity of demand for a good also tends to be higher when a larger portion of a person's budget is spent on the good.
Thank you for providing additional information. In light of this, the demand for a 45-cent box of salt that you buy once a year would likely be considered more inelastic. This is because the price of the salt box is relatively low compared to an individual's overall budget, indicating that even a substantial increase in price would have a minimal impact on their purchasing behavior. In other words, the demand for this salt box is less sensitive to changes in price due to its small proportion of the consumer's budget.
b. A type of high-powered ski boat that you can rent from any one of a number of rental agencies:
Based on the information provided, the demand for a type of high-powered ski boat that you can rent from any one of a number of rental agencies would likely be more elastic. This is because there are likely several substitutes available in the market. If one rental agency increases the price of the boat, customers can switch to another agency or choose a different type of boat altogether. Additionally, the cost of renting a high-powered ski boat is likely to be a significant portion of a person's budget, making them more sensitive to changes in price. Therefore, the demand for this type of boat is likely to be more responsive to changes in price, indicating a higher elasticity of demand.
c. A specific brand of bottled water:
Based on the given information, it is not possible to determine the elasticity of demand for a specific brand of bottled water. The elasticity of demand for a specific brand of bottled water would depend on various factors such as the availability of substitutes, consumer preferences, brand loyalty, and the proportion of income spent on the brand. Without this additional information, it is not possible to accurately characterize the demand for a specific brand of bottled water as being more elastic or more inelastic.
Three factors affect the price elasticity of demand. If there are more close substitutes for a good, the price elasticity of demand increases. The price elasticity of demand for a good also tends to be higher when a larger portion of a person's budget is spent on the good. In addition, if people have a longer period of time to adjust to a price change and change their consumption patterns, the price elasticity of demand tends to be higher.
Thank you for providing additional factors that affect the price elasticity of demand.
In light of these factors, let's reassess the elasticity of demand for the goods mentioned.
a. A 45-cent box of salt that you buy once a year:
Given that salt is a low-cost item and typically represents a small portion of a person's budget, the price elasticity of demand for a 45-cent box of salt would likely be low. Additionally, there are few close substitutes for salt, further contributing to a lower elasticity of demand.
b. A type of high-powered ski boat that you can rent from any one of a number of rental agencies:
As mentioned earlier, for a high-cost item like a ski boat rental, the price elasticity of demand tends to be higher. This is because consumers are likely to consider alternative rental agencies or different types of boats if the price increases. Moreover, the availability of substitute rental options contributes to a higher elasticity of demand.
c. A specific brand of bottled water:
Without considering specific information about the availability of substitutes, consumer preferences, and brand loyalty, it is not possible to accurately determine the elasticity of demand for a specific brand of bottled water. However, if there are numerous substitute brands available, the price elasticity of demand would increase. Additionally, if a person's budget allocation for bottled water is significant, it would also contribute to a higher elasticity of demand.
In summary, when there are more close substitutes, a larger portion of the budget is spent on the good, and people have a longer time to adjust their consumption patterns, the price elasticity of demand tends to be higher.