Determinants of elasticity of demand. Different products have different elasticity values. It is thought there are factors that lead to certain elasticity values. Different elasticities. P.
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Determinants of elasticity of demand
Different products have different elasticity values. It is thought there are factors that lead to certain elasticity values.
We see the same price change along both curves, but the flatter curve has a greater quantity response. If you worked out the elasticity, you would see the flatter curve is more elastic than the steep curve in any price range.
Let’s use milk as an example. Milk purchases by the typical consumer likely takes a relatively small percentage of the budget for a consumer. Changes in the price elicit almost no change in the quantity demanded.
A few years back the government taxed yachts and this raised the price of yachts. The Gov thought rich people would go on buying. Many buyers though said I’ll keep my current yacht longer because this increase is too much of my budget. The price change had a significant on the quantity demanded.