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Jenna is looking to buy a new computer

Economics Dec 13, 2020

Jenna is looking to buy a new computer. When would the price elasticity of demand be most elastic for her computer? Order the situations from most elastic to most inelastic.

1. Jenna's computer is working fine, but she wants to purchase a new model.

2. Jenna uses her computer recreationally and wants to be able to listen to music with her friends in two days when they visit.

3. Jenna's work computer broke, and she needs a new one or else she cannot work.

Expert Solution

Order of the situation from being most elastic to most inelastic :

1. Jenna's computer is working fine, but she wants to purchase a new model.

2. Jenna uses her computer recreationally and wants to be able to listen to music with her friends in two days when they visit

3. Jenna's work computer broke, and she needs a new one or else she cannot work.

Jenna's elasticity of demand will be most elastic when she has the time to take purchase decision of the new computer. This happens in the first case, when she is already having a functional computer, but she still wishes to buy a new computer. So since she has a functional computer with herself, she would be willing to wait and delay her purchase, to check her options or to wait for price changes.

When Jenna's computer has already broken down, and getting a computer is a top priority as she cannot do her work without it. In this case, Jenna would be buying a computer without giving much consideration to the price of the computer, as the time frame in this case is very limited to influence her purchasing decisions. Thus the demand of new computer in this case is the most inelastic in nature.

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