For Each of the Following Goods Would You Expect the Demand

question 140

Essay

For each of the following goods would you expect the demand to be elastic or inelastic? Provide explanation for each of your rationales. a. oil b. Coca-Cola c. bread
B. a. The demand for oil is inelastic, at least in the short run, because there are few substitutes for oil in its major use, transportation. However if the price of oil increases by a significant amount for a long period of time then the demand for oil will become more elastic as substitutes are developed. b. Some people have an elastic demand for Coca-Cola because for them Pepsi or other soft drinks can be good substitutes for Coca- Cola, whereas other people may have a more inelastic demand for Coca-Cola if they will keep buying Coca-Cola when the price of Coca-Cola increases. c. The price of bread is too small a portion of the budgets to worry very much about its price so the consumption of bread is inelastic.

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Definitions:

Price-Discriminating

A practice where a seller charges different prices to different buyers for the same product or service, not based on the cost differences but on the buyer's willingness or ability to pay.

Pricing Difference

The variation in pricing for the same or similar products and services in different markets or segments.

Price Discrimination

A pricing strategy where a seller charges different prices to different customers for the same product or service, potentially maximizing revenue by targeting individual willingness to pay.

Insurance Company

A business entity that provides financial protection against losses or damages in exchange for premium payments.