Which of the following products would you expect to have the most price elastic demand?

Question

BlackTom AI · Accepted Answer

To determine which product has the most price elastic demand, we need to consider how sensitive buyers are to price changes.
Option a: 'a product consumers need to use immediately' describes a good with inelastic demand because immediate-use necessities are hard to forgo even if price rises, leading to smaller changes in quantity demanded.
Option b: 'a very inexpensive product' tends to have relatively inelastic demand in terms of percentage change; while the absolute amount may change, the proportional response is small because the cost is low and consumers are unlikely to drastically alter purchasing for small price shifts.
Option c: 'A luxury product with many substitutes' is characteristic of high price elasticity. Luxuries are not essential, and many substitutes give consumers easy options to switch if the price increases, causing a larger percentage drop in quantity demanded when price rises.
Option d: 'a product necessary for survival' clearly points to inelastic demand, since people must buy it regardless of price to meet basic needs, resulting in a small change in quantity demanded.
In summary, the elasticity of demand tends to be highest for non-essential items (luxuries) with readily available substitutes, because consumers can and will switch to alternatives when prices move, amplifying the responsiveness of quantity demanded to price changes.

MUF0061 Economics Unit 1 - Semester 1, 2025 Revision Quiz: Price Elasticity of Demand (5 - 10 minutes)

Which of the following products would you expect to have the most price elastic demand?

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