QQuestionEconomics
QuestionEconomics
Goods that are considered to be needs tend to be:
A. Elastic when the price changes.
B. Inelastic when the price changes.
C. Elastic when the supply changes.
D. Inelastic when the supply changes.
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Answer
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Step 1:Let's solve this economics problem step by step:
Step 2:: Understanding Price Elasticity of Demand
Price elasticity of demand measures how sensitive consumer demand is to changes in price. Goods are classified as elastic or inelastic based on how much their quantity demanded changes when price changes.
Step 3:: Defining Needs
Needs are essential goods that people must purchase regardless of price changes. These are typically basic necessities like food, water, electricity, and basic healthcare.
Step 4:: Characteristics of Needs
Needs typically have a low price elasticity of demand. This means that even when the price changes, the quantity demanded remains relatively stable because consumers must continue to purchase these goods.
Step 5:: Analyzing the Options
A. Elastic when the price changes - INCORRECT B. Inelastic when the price changes - CORRECT C. Elastic when the supply changes - INCORRECT D. Inelastic when the supply changes - INCORRECT
Step 6:: Explanation
When the price of a need increases, consumers will still purchase roughly the same quantity because these are essential goods. This is the definition of inelastic demand. For example, if the price of bread increases, people will still buy bread because it's a necessity.
Final Answer
Needs are inelastic when the price changes. Key Concept: Elasticity = \frac{Percentage~Change~in~Quantity~Demanded}{Percentage~Change~in~Price} - If |Elasticity| < 1, the good is inelastic - Needs typically have an elasticity close to zero, meaning demand is highly inelastic
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