Question

a. What are the major determinants of price elasticity of demand? Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers. Substitutability checked Proportion of income unanswered Luxuries versus necessities unanswered Time unanswered Excise taxes unanswered Availability of complementary goods unanswered Inferior goods and normal goods unanswered b. Use those determinants and your own reasoning in judging whether demand for each of the following products is probably elastic or inelastic: Bottled water: . Toothpaste: . Crest toothpaste: . Ketchup: . Diamond bracelets: . Microsoft's Windows operating system: . Next Visit question mapQuestion 2 of 10 Total 2 of 10 Prev

Answer 1

(a) Determinants of elasticity of demand are:

- Substitutability

- Proportion of income

- Luxuries versus necessities

- Time

(b)

(i) Bottled water - Elastic (since many substitutes exist)

(ii) Toothpaste - Inelastic (since this is a necessity)

(iii) Crest toothpaste - Elastic (since many substitutes exist)

(iv) Ketchup - Elastic (since many substitutes exist)

(v) Diamond bracelet - Elastic (since it's a luxury good, occupying high share of budget)

(vi) Microsowft Windows - Inelastic (since close substitutes are not available)