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Homework answers / question archive / Estimate the price elasticity of demand for bottle water (provide a number)
Estimate the price elasticity of demand for bottle water (provide a number). Explain your eglimate. Why might the demand for boftle water be elastic? why might it be inelastio?
Demand for water bottle is inelastic.
Because water bottle doesn't have any close substitute. It is a necessary goods as water is use in day to life or activities. Therefore it's demamd is inelastic when we compare to luxary.
Lets take an Example
If price of water bottle increases from 10 to 15 per bottle. Its demamd decrease from 100 to 90
Ed = -%? in Quantity demanded/ %?in price
%? in quantity demanded = (90-100/100)*100
= -10%
%?in price = (15-10/10)*100
= 50%
Put values in Elasticity formula
Ed =-(-10%/50%)
= 1/5
=0.2
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