For each pair of commodities, state which you think is the more price-elastic and gave your reasons: perfume and salt; penicillin and ice cream; automobiles and automobile tires; ice cream and chocolate ice cream.
This explanation should help you make these distinctions.
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To determine which commodity is more price-elastic, we need to consider the concept of price elasticity of demand. Price elasticity of demand measures the responsiveness of quantity demanded to changes in price.
The formula to calculate price elasticity of demand is:
Price Elasticity of Demand = Percentage change in quantity demanded / Percentage change in price.
Now, let's analyze each pair of commodities to determine their price elasticity:
1. Perfume and Salt:
Perfume is generally considered to be a luxury product and not a necessity. Luxury goods tend to have a more elastic demand because consumers have more alternatives and can easily switch to other perfumes or alternatives like body sprays. On the other hand, salt is a basic necessity and does not have many substitutes. Therefore, salt is likely to have a less elastic demand compared to perfume.
2. Penicillin and Ice Cream:
Penicillin is a life-saving medicine and essential for treating various infections. In such cases, the demand for penicillin tends to be inelastic because it is a necessity and there are limited substitutes available. On the other hand, ice cream is considered a non-essential and indulgent product, so it has more elastic demand as consumers have many alternatives and can easily switch to other flavors or frozen desserts.
3. Automobiles and Automobile Tires:
Automobiles are generally considered durable goods and involve a significant investment. The demand for automobiles tends to be inelastic because they are considered necessary for transportation and have fewer substitutes. However, automobile tires are relatively smaller purchases compared to the entire automobile and can be easily replaced or switched to alternative brands. Therefore, the demand for automobile tires is likely to be more elastic compared to automobiles.
4. Ice Cream and Chocolate Ice Cream:
In this case, both ice cream and chocolate ice cream are similar products and tend to have similar substitutes. Therefore, the price elasticity of demand for both is expected to be relatively elastic, as consumers can easily switch from one flavor to another without much inconvenience.
Please note that these are general assumptions and may vary based on individual preferences, market conditions, and other factors. Statistical data and market research can provide more accurate and specific insights into the price elasticity of different commodities.