If the price of this item increases, how would this affect the quantity of the g
ID: 1182059 • Letter: I
Question
If the price of this item increases, how would this affect the quantity of the good that you consume? Is the Demand for this good Price elastic or Price inelastic? Justify your classification by talking about the determinants of elasticity as they apply to this product. Say price is on the rise for this product and you are the manager of a store, would you be thrilled to be selling this product? Under what circumstances would you want to own a business that sells this product? In other words, how does an increase in price for this good affect your Total Revenue? Using specific examples, relate the concepts of Cross Elasticity and Income Elasticity to this product.Explanation / Answer
The impact might be negative. Based on the law of demand, an increase in price causes the quantity demanded to decline. This case is called normal goods. But there are some types of goods that the impact might be positive. An increase in price causes an increase in quantity demanded. It might be complement goods, or inferior goods or some luxury products.