What has a higher elasticity of demand? 1) Table salt or filet mignon? 2) Bottled water or Tap water? 3) Plasma-Screen TV's or Televisions?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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There are generally said to be three main factors that determine whether the demand for a good will be elastic or inelastic.  These factors are:

The availability of substitutes.  If there are things that people can buy instead of a given product, then an increase in the price of that product will decrease the quantity demanded more drastically.  The same is true if the purchase can be put off.  Either way, such products will have more elastic demand.

How expensive the product is for a given person.  The more expensive the product (compared to a given person’s budget) the more elastic its demand will be.

The amount of time in question.  The longer the time a person has to adjust their spending habits, the more elastic the demand for a given good.

Now, let us apply these rules to the three pairs of goods you mention.  Table salt is cheap and filet mignon is expensive, so the demand for salt will be less elastic.  The same is true for tap water so its demand will be less elastic.  There are more substitutes for plasma TVs (CRT TVs, LCD TVs, etc) than there are for all TVs.  Therefore, the demand for plasma TVs will be more elastic.

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