Which of the following would you expect to have more price e

Which of the following would you expect to have more price elastic demand and why? (2 points each) 9) a. Required textbooks or mystery novels b. Pepsi or soda (pop) in general ngthe nesxt five days or gasoline during the next five years d. Gasoline or orange juice

Solution

a. Required textbooks or mystery novels – It is related to nature of the commodity. It means whether the commodity is necessasity, comfort or luxuries. Mystery novels will have more elastic demand because they are not necessities compared to textbooks. We cannot do away with textbooks as they are necessary to complete a particular subject. Hence, the mystery novels have more elastic demand in comparision to text books.

b. Pepsi or Soda in general – It is related to the avaiability of subsittutes. Commodities having substitutes is more elastic than the commodities which do not have substitutes. Pepsi has more elastic demand than soda in general because it is a specialty product, even though there are similar products that are competing against it. Soda, in general, has few or no substitutes. Hence, pepsi hase more elastic demand than soda.

c. Gasoline during the next 5 days or during the next 5 years – It is related with the time period. The longer the time period, the more elastic demand is. Therefore, gasoline during the next 5 years has the more elastic demand.

d. Gasoline or Orange juice – Here orange juice has more elastic demand because it has substitutes and it is not necessary for the people. Gasoline in constrast has inelastic demand because it is somehow a necessary and it basically do not have any close substities.