Which of the following would have the most elastic demand?
Part 2
A.
Electricity.
B.
Cigarettes.
C.
Salt.
D.
Coca-Cola.
B. Cigarettes
To determine which of the given options would have the most elastic demand, we need to understand the concept of elasticity of demand. In economics, elasticity of demand refers to the responsiveness of the quantity demanded of a good or service to changes in its price.
To calculate the elasticity of demand, we consider the percentage change in quantity demanded compared to the percentage change in price. Higher elasticity of demand indicates that the quantity demanded is more responsive to changes in price.
There are a few factors that can affect the elasticity of demand, such as the availability of substitutes, necessity of the good, and the proportion of a consumer's income spent on the good.
Now, let's analyze each of the given options to determine which one would likely have the most elastic demand:
A. Electricity: Electricity is essential for most people's everyday lives, and there are limited substitutes available. However, the proportion of income spent on electricity is typically low, making it less likely to have highly elastic demand.
B. Cigarettes: Cigarettes are addictive and often have few close substitutes. Additionally, some smokers may be highly dependent on cigarettes, making the demand less elastic.
C. Salt: Salt is a low-cost commodity and is widely available, making it easily substitutable. However, the proportion of income spent on salt is insignificant, which could make the demand less elastic.
D. Coca-Cola: Coca-Cola is a branded product that has many substitutes in the form of other soft drinks. It is also a non-essential item, resulting in higher elasticity of demand compared to necessity goods.
Based on these considerations, it is likely that cigarettes would have the most elastic demand out of the given options.
To determine which of the following options would have the most elastic demand, we need to assess the factors that affect elasticity of demand. Elastic demand generally occurs when there are many substitutes available, when the item represents a significant proportion of a consumer's income, and when the purchase can be postponed or foregone.
Let's analyze each option:
A. Electricity: Electricity is a necessity in modern life, but there are limited substitutes available. Moreover, electricity represents a moderate proportion of a consumer's income, and it is difficult to postpone or forego its purchase without significant lifestyle changes. Therefore, the demand for electricity is relatively inelastic.
B. Cigarettes: Cigarettes have numerous substitutes available, such as nicotine patches, gum, or electronic cigarettes. Additionally, the purchase of cigarettes is discretionary and can be easily postponed or foregone, especially when considering health-related concerns. Therefore, the demand for cigarettes is generally more elastic compared to electricity.
C. Salt: Salt is a low-cost commodity, and it is not a significant proportion of a consumer's income. Although there are no direct substitutes for regular table salt, consumers can easily switch to alternatives like sea salt or kosher salt. However, the demand for salt is relatively inelastic due to its low price and necessity in cooking and food preservation.
D. Coca-Cola: Coca-Cola is a branded soft drink with numerous substitutes available, such as Pepsi, Dr. Pepper, or other carbonated beverages. The purchase of Coca-Cola is discretionary and can be postponed or replaced with alternative choices. Therefore, the demand for Coca-Cola is generally more elastic compared to electricity and salt, but slightly less elastic compared to cigarettes.
Based on these assessments, the option with the most elastic demand would be B. Cigarettes.