|Author||Topic: an eco question.|
|The demand for a product tends to be price inelastic if:
A) few good substitutes for the product are available.
B) few good complements for the product are available.
C) people spend a large share of their income on the product.
D) the population in the market area is large.
now the answer is A... but i dont understand it...
eg could be cigerettes or insulin pills for diabetic people...
what would be substitute for insulin pills...people have to buy those....right??
plz help...Thanks in advance
|When demand is inelastic, a change in price will not change the quantity of that item people buy.
Say hamburgers and hotdogs are good substitutes. If all of a sudden the price of hamburgers doubles, you will buy hotdogs instead. In other words, you will substitute hotdogs for hamburgers, decreasing the demand for hamburgers when their price rises. Since the quantity of hamburgers demanded depends on their price, this is elastic demand.
With insulin on the other hand, there are no good substitutes - if are diabetic and don't have insulin, you could die. If the price of insulin rises (or falls), you have no choice but to continue buying it. Since the quantity demanded does not change with price, this is inelastic.
|Hi can u pls help me out how to study for economics finding difficult!|