Which of the following products would you expect to have the most price elastic demand?

Question

BlackTom AI · Accepted Answer

Price elasticity of demand measures the percentage change in quantity demanded resulting from a one percent change in price, so products with large changes in quantity for small price moves are highly elastic.

1) Relevant knowledge points and concepts
- Price elasticity of demand (PED): (% change in Q) / (% change in P).
- Key determinants of PED: availability of substitutes, whether the good is a necessity or a luxury, proportion of income spent on the good, and time horizon. More substitutes and luxuries → more elastic. Necessities, low-priced items (small budget share), and goods essential for survival → more inelastic.

2) Step-by-step reasoning
- Compare each option against the determinants:
  a. "A product consumers need to use immediately" implies urgency/necessity; consumers are less sensitive to price → inelastic.
  b. "A luxury product with many substitutes" implies not necessary and easy to switch brands or alternatives → high sensitivity to price → elastic.
  c. "A very inexpensive product" occupies a tiny share of the budget; even large percentage price changes usually have minor effect on purchasing behavior → inelastic.
  d. "A product necessary for survival" (e.g., life-saving medicine, basic food staples) is the classic inelastic case; quantity demanded changes little with price.

3) Calculations
- No numerical calculation required; the answer follows from qualitative determinants. If one computed PED conceptually, options a, c, and d yield low PED magnitudes (|PED| < 1), while option b yields a high PED magnitude (|PED| > 1).

4) Why the correct answer is correct
- A luxury with many substitutes is both nonessential and easy to replace, so even a small price increase causes consumers to switch to alternatives or forego the purchase, producing the most price-elastic demand.

5) Why other options are incorrect
- a: Immediate-use/necessary goods are relatively inelastic. c: Very cheap items have small budget share → low elasticity. d: Survival necessities are highly inelastic.

Conclusion: The most price elastic demand is option b. This confirms the correct answer: b. A luxury product with many substitutes.

Which of the following products would you expect to have the most price elastic demand?单项选择题

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