Question

Why would bread prices come to equilibrium faster than cars? Explain why and defend your answer.

Answer 1

As we know the basic difference between the bread and cars is that bread is the necessary goods whereas the car is as not as necessary as bread for the human being. That's why the bread has inelastic good and car is elastic good.

When elasticity is good is inelastic it is less sensitive to price, it mean when price of bread increase people not reduce there quantity drastically, becuase it is a necessary good. Whereas when the elasticity of good is elastic it is more sensitive to the price, it means when price of car increases people reduce there quantity demand drastically. So this is the basic reason why bread price is come to equilibrium faster than cars.

The other reason is that bread is consumed by large number of people as compare to cars. So the change in demand and supply of bread is faster than cars due to which the bread reaches its equilibrium faster as compare to cars.