Question
Asked Sep 13, 2019
364 views
A good’s price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the least elastic demand?
 
1. A heart valve for heart attack victims
 
2. Sports car
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Expert Answer

Step 1

Price elasticity of demand measures the change in quantity demanded due to change in price. Similarly, price elasticity of supply measures the change in quantity supplied due to change in price. Price elasticity of demand is negative in value due to the inverse relationship between quantity demanded and price. On the other hand, price elasticity of supply has a positive value due to a positive relationship between price and quantity supplied.

Step 2

If the demand of a particular good is inelastic then a change in price of that good will not change the demand. Similarly, if the demand of a good is elastic then a change in price will have an affect on quantity demanded.

Step 3

A heart valve for heart attack victimns is a necessity and should have inelastic demand and a change in price will not affect the demand of that product. On the other hand, a sports car is a luxury and its demand will get affected by a change in pr...

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Business

Economics

Consumer demand theory

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