ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Detailed explanation-1: -Elasticity of Demand Examples Products with close substitute availability, such as different brands of ice cream, may also have elastic demand as consumers typically switch to cheaper alternatives in response to price changes.
Detailed explanation-2: -Inelastic demand means that when the price of a good or service goes up, consumers’ buying habits stay about the same, and when the price goes down, consumers’ buying habits also remain unchanged.
Detailed explanation-3: -As a result, demand and supply often-but not always-tend to be relatively inelastic in the short run and relatively elastic in the long run.
Detailed explanation-4: -Mankiw, Chapter 5, Problem #9. You’d expect the price elasticity of demand to be higher in the market for vanilla ice cream than for all ice cream because vanilla ice cream is a narrower category and other flavors of ice cream are close substitutes for vanilla.