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Identify the major determinants of price elasticity of demand
Identify the major determinants of price elasticity of demand. Use those determinants in judging whether demand for each of the following products is probably elastic or inelastic:
(a) bottled water
(b) toothpaste
(c) Crest toothpaste
(d) ketchup
(e) diamond bracelets
(f) Microsoft's Windows operating system
Expert Solution
There are several factors that enter into a consumer's decision to buy at a certain price at a given place and time. Among these are the consumer's income, the availability of similar products, the expectation of future prices, and whether the item being considered is a necessity or a luxury - that is, a "need" vs. a "want."
| Item | Elastic or Inelastic | Reason |
| (a) bottled water | Elastic | many substitutes, including different brands of bottled water, other drinks, and water from the tap |
| (b) toothpaste | Elastic | many substitutes, including different brands and tooth brushing powders |
| (c) Crest toothpaste | Inelastic | if you want Crest and only Crest, you have made your demand inelastic by your loyalty to the brand |
| (d) ketchup | Elastic | many different brands and an assortment of sizes and prices |
| (e) diamond bracelets | Elastic | this is a luxury, not a necessity, so you can easily do without it |
| (f) Microsoft's Windows operating system | Inelastic | there are only a few choices for operating systems, and Microsoft is the most popular |
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