Q:

What are examples of elastic and inelastic goods?

A:

Examples of elastic goods are coffee, airline tickets and stocks. Examples of inelastic goods are water, electricity, and telephone service. The elasticity of a good is the sensitivity of its demand to changes in its price.

If an increase or decrease in price has little or no effect on the demand for the good, then the good is considered to be highly inelastic. Likewise, if an increase or decrease in price has a dramatic effect on the demand for the good, then the good is considered to be highly elastic. A couple of factors that determine the elasticity of goods include the existence of substitutes and disposable income. If a good has a close substitute, consumers choose to purchase the substitute if the good rises in price. Assuming that a consumer's income level remains the same, if the price of a good rises then so does its opportunity cost, which means that purchasing the same amount of the good as before comes at a higher expense. In situations in which prices are rising and incomes are constant, consumers choose not to purchase luxury goods, such as airline tickets and stocks. Goods such as water and electricity are inelastic because they have an innate biological or sociological demand.

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