Question

Think of three goods for which the demand is inelastic with respect to price. Do these...

Think of three goods for which the demand is inelastic with respect to price. Do these goods ever go on sale? Does understanding the relationship between elasticity and total revenue help you understand why some goods go on sale and others don’t? Share your thoughts.

Homework Answers

Answer #1

Inelastic goods are Gasoline, Medical Services, Tobacco.

No, these goods will never go to sale because the seller doesn't depend on the price variation to manage the sale of the goods. People will demand these goods no matter what the price is.

Yes, the revenue of the inelastic good will fall if the price is reduced and the same for the elastic good will rise if the price is increased. Hence the elastic good owner will go more on sale and decrease the price and increase its revenue.  

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