Question:
14.Suppose the price elasticity of demand is -1.3 for Good A and -2.1 for Good B. Which of the following is consistent with these demand elasticities?
a. Good A:Grapes
Good B: Fruit
b. Good A:Milk over the next year
Good B: Milk over the next month
c. Good A: Diamond necklaces
Good B:Beds
d. Good A: Train tickets prior to the invention of automobiles
Good B: Train tickets following the invention of automobiles
A negative value indicates that the demand is inelastic, which means a change in the price causes minimal change in the quantity demanded.
In the above, the elasticity is less in good B which would be for a necessary good compared to good A which is more elastic.
Milk over the next month is more inelastic compared to milk over the next year.
More time, increases elasticity of demand because a consumer has time to either shift to other products or change the demand completely.
