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Chapter 19: Q. 6 (page 434)

It is very difficult to find goods with perfectly elastic or perfectly inelastic demand. We can, however, find goods that lie near these extremes. Characterize demands for the following goods as being near perfectly elastic or near perfectly inelastic.

a. Corn grown and harvested by a small farmer in Iowa

b. Heroin for a drug addict

c. Water for a desert hiker

d. One of several optional textbooks in a pass-fail course

Short Answer

Expert verified

a) The demand for corn is near perfectly elastic.

b) The demand for a heroin for a drug addict is near perfectly inelastic.

c) The demand for water in a desert area is near perfectly inelastic.

d) The demand for optional textbook is a pass-fail course is near perfectly elastic.

Step by step solution

01

Given information(part a)

A modest farmer in Iowa grows corn and harvests it.

02

Explanation of corn growing and harvesting 

Corn demand is almost perfectly elastic. Individuals adjust their demand for maize in response to price fluctuations, taking into account the availability of corn and alternative replacements. The percentage change in demand is bigger than the percentage change in corn price terms.

03

Given information(part b) 

For a drug addict, the need for heroin is nearly inelastic.

04

Explanation of heroine for drug addict 

For a drug addict, the need for heroin is nearly inelastic. The demand for heroine is unaffected by price fluctuations. Changes in heroine prices have little effect on a drug user.

05

Given information(part c) 

In a desert, water demand is almost perfectly inelastic.

06

Explanation of water for a desert hiker.

In a desert environment, water demand is nearly inelastic. Because finding water in a desert is extremely difficult, demand does not adapt to price fluctuations. Demand that is perfectly inelastic is demand that does not change in response to price changes.

07

Given information(part d) 

In a pass-fail course, one of multiple optional textbooks.

08

Explanation of textbook in a pass-fail course 

In a pass-fail course, the demand for optional textbooks is nearly perfect elastic. Demand is elastic due to the variety of options available. Consumer demand shifts in response to price fluctuations.

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Most popular questions from this chapter

An increase in the market price of men's haircuts, from \(15per haircut to \)25per haircut, initially causes a local barbershop to have its employees work overtime to increase the number of daily haircuts provided from 35to45. When the $25 market price remains unchanged for several weeks and all other things remain equal as well, the barbershop hires additional employees and provides 65 haircuts per day. What is the short-run price elasticity of supply? What is the long-run price elasticity of supply?

Based solely on the information provided below, characterize the demands for the following goods as being more elastic or more inelastic.

a. A 45-cent box of salt that you buy once a year

b. A type of high-powered ski boat that you can rent from any one of a number of rental agencies

c. A specific brand of bottled water

d. Automobile insurance in a state that requires autos to be insured but has only a few insurance companies

e. A 75-cent guitar pick for the lead guitarist of a major rock band

Suppose that the cross price elasticity of demand between eggs and bacon is -0.5. What would you expect to happen to purchases of bacon if the price of eggs rises by 10 percent?

Table 19-2 indicates that the short-run price elasticity of demand for tires is 0.9. If an increase in the price of petroleum (used in producing tires) causes the market prices of tires to rise from \(50 to \)60, by what percentage would you expect the quantity of tires demanded to change?

The value of cross price elasticity of demand between goods Xand Yis 1.25, while the cross price elasticity of demand between goods Xand Zis -2.0. Characterize Xand Yand Xand Zas substitutes or complements.
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