Question

What do you think happened with the elasticity of demand for Apple EarPods (headphones with cable), when the Airpods appeared?

(a) It became more elastic, because they are complements

(b) It became less elastic, because they are substitutes

(c) It became more elastic, because they are substitutes

(d) It became less elastic, because they are complements

Answer 1

Substitutes are those goods which can replace each other

For example tea and coffee

Elastic demand is that type of demand in which even there is small change in price can causes heavy change in the quantity demanded

So in this the consumers are price sensitive

Opposite to it is inelastic demand

Complements are those good with complete each other

For example pen and paper

Here in the given question since earpods and airpods arereplacement to each other

They are substitutes it means when the airpods appeared it means it can replace earpods

So here the demand is elastic in nature because consumer will prefer airpods because it has no wires

The answer here is option C