Question

Describe an example of a product that has highly elastic demand. Describe at least two factors that make this product's demand so elastic.

Answer 1

ANSWER: GOLD JEWELERY

EXPLANATION: Gold Jewelery is a classic example of a product with highly elastic demand. Consumers often tend to sway away to substitute products or postpone buying the gold jewelery if the price increases by a very small amount.

Two factors which makes the product's demand so elastic are:

a. AVAILABILITY OF SUBSTITUTES: People often tend to shift to substitute products when the price of the product increases. For example, for Gold Jewelery, people often tend to shift to jewelery which are artificial in nature or are made up of comparatively cheaper metals like silver.

b. INCOME LEVEL: Income level of the consumer plays a very important role in the market. Buying Gold jewelery after price hike for a person who earns $1000 a month maybe a trouble but for someone who earns as handsome as $10,000 a month may not be burden.

Answer 2

A good or service is said to be highly elastic if there is a a slight change in price this will cause a sharp change in the quantity. Usually these kinds of products are readily available in the market - example is jewelry. lottery ticket
The factors are - The govt that propose a law that is in favor of the industry
availability of substitutes
hope it helps