yego.me
💡 Stop wasting time. Read Youtube instead of watch. Download Chrome Extension

Determinants of elasticity example | APⓇ Microeconomics | Khan Academy


2m read
·Nov 11, 2024

We are asked which of the following describes a good that is likely to have the most elastic demand. Choose one answer. So pause this video and see if you can answer that.

All right, so the first choice right over here, they talk about a luxury with many substitutes. We already talked about when we're dealing with substitutes. If there's a lot of substitutes, that makes the quantity demanded very sensitive to price. So this would make it more elastic. To have many substitutes is more elastic, and then the fact that it's a luxury—it's not something that people need—this would also make quantity more sensitive to price generally. So we would also say more elastic.

So this is looking like a good candidate, but let's check the other options here.

A necessity with few substitutes? Well, this is the opposite. If it's a necessity, this would be more inelastic or less elastic. Less elastic. If you have a change in price for that thing, people say, "Well, I still have to buy that thing; I can't substitute it with other things." This would also be less elastic. And remember, we're looking for the most elastic demand, so we can rule this one out.

A broadly defined good such as food? Well, we just talked about that. If we're talking about food and there's a price change in food, well, we need food. So our quantity demanded would not likely change, or a percent change in quantity would not likely be that much. This would be fairly inelastic. Rule that one out.

Goods that make up a small share of the budget? Well, this goes back to the example with bubble gum. If bubble gum goes from 25 cents to 30 cents, we might not care so much versus if a car goes from 25,000 to 30 thousand dollars. So the small things that we might not care about price changes so much, if we don't care so much about price changes, that would imply less elasticity. So that definitely would not be the most elastic demand.

Goods that have to be bought under a short time constraint? Well, a good example is that it's raining and people need umbrellas right now—in the next five or ten minutes—and they might not necessarily be so sensitive to price. So this is going to be less elastic, and so once again we would rule this out. If we had a long time frame, well then people might be able to shop around for substitutes and then things might get a little bit more elastic; they would be more sensitive to price.

So we definitely like in this scenario choice A.

More Articles

View All
Who God is in Different Cultures | The Story of God
Who God is, is almost universally a great unknown. There are different manifestations of God: different statues, different icons, different sounds, smells, looks of God across cultures. God has a sound. To Navajo, God is a light, bright light to many peop…
109-Year-Old Veteran and His Secrets to Life Will Make You Smile | Short Film Showcase
[Music] Yeah, a lot of people say God kept you here to help others, but I don’t know why he kept me here. I can’t tell you. I ain’t talk to him; he ain’t talk to me. My name is Richard Ain Overton. I am 109 years old! [Music] I still walk, I still talk, a…
Gordon Ramsay Learns the Art of Braai Cooking | Gordon Ramsay: Uncharted
[Music] At least I can hear that. Yeah, yeah, loud and clear. I’ve been fishing in some remote places, but never in front of an audience of hippos. I’m cause you’re looking over because those things. Josh, lonely, yes? How that thing’s getting closer. Ye…
watch this if you feel like a failure
Have you ever felt like a failure after scrolling on social media and seeing somebody that is significantly younger than you achieve so much than you, that you ever maybe did in your whole life? They have everything you have ever wanted: success, money, r…
How Much Money is LOVE Worth?
Hey, Vsauce. Michael here. And I’m in Los Angeles, but today we’re going to talk about love. You can’t buy love, but what if you could? I mean, what if I had a machine that could make you fall in love with someone for the rest of your life? What should I…
Stick 'Em! | Wicked Tuna: Outer Banks
Something feels good. I’m warmer, not was yesterday. I’m gonna say the same thing: bottom line, time’s running out, and we need more fish, always more fish. We’ve got to support my family. I got to pay my crew. I have to maintain my boat, and I have to tr…