Price elasticity for each of the following pairs of goods...

. Price Elasticity For each of the following pairs of goods, which good would you expect to have more elastic demand? Pairs of Goods More Elastic Demand Mansions or rental homes Vanilla ice cream or desserts Gasoline over the next 3 years or gasoline over the next 4 months Root beer or water

Transcript

00:01 So here we're talking about elasticity, and in particular, we're talking about the elasticity of demand, which is the change in quantity demanded over the percentage change in price.

00:11 So when you say more elastic, right, the question says more elastic, what you should be thinking of is which is easier to switch away from, right? if something is easy to switch away from, when the price goes up, you run to this.

00:30 Substitutes but if something is necessary and there's no way to replace it when the price goes up you're stuck buying it because you need it and you have nowhere else to go right so here i'm looking for which of these is easier to switch away from right um a is very difficult right but my guess is butter more elastic um because you've got things like margarine substitute, right? there's like knockoff butter where you can just, you know, you can buy margarine or you can buy other types of spreads, you know, you can use oil, but eggs have no real substitute, right? there's no such thing as like a fake egg to the best of my knowledge, or if there are fake eggs, they're much less widespread than alternatives to butter.

01:26 So because margarine exists, right, i would expect butter to be much more elastic.

01:34 When butter gets expensive people switch over to inferior knockoffs of butter like margin so for b speedboats are more elastic speedboats they are much less necessary right everyone needs light bulbs and giving up on light bulbs is not really an option what are you going to do sit at home in the dark all day so even if the price of light bulbs goes up i'm going to keep buying them speed boats are sort of a nice to have luxury, but they're not necessary.

02:09 They're much easier for someone to give up on them if the price becomes unappealing.

02:15 See, here we have, so branded versus generic.

02:28 I would guess that generic is going to be more elastic because my assumption is that the brand has power to retain customers, right? the whole point of creating a brand is that your customers are loyal.

02:50 That's why brands exist.

02:52 But for generic orange juice, there is no brand loyalty, right? like it's just orange juice.

02:56 So if the price goes up, you might look around for another generic brand.

02:59 You might switch to grapefruit juice, right? you have no commitment to that brand...

Question

. Price Elasticity For each of the following pairs of goods, which good would you expect to have more elastic demand? Pairs of Goods More Elastic Demand Mansions or rental homes Vanilla ice cream or desserts Gasoline over the next 3 years or gasoline over the next 4 months Root beer or water

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