Question

For the following list of goods state whether the demand is elastic or inelastic and draw the respective curves. Give reason for your answer.

(i) Rice in West Bengal,

(ii) Rolex watches

(iii) Matchboxes

(iv) Bicycles

Answer 1

(i) Rice in West Bengal: Inelastic demand since rice in West Bengal is the staple food and hence, it is a necessity.

(ii) Rolex watches: Elastic demand because Rolex watch is a luxury and hence it will have an elastic demand.

(iii) Matchboxes: Matchboxes will have a relatively inelastic demand since matchboxes costs really less.
(iv) Bicycles: Bicycles will have a relatively elastic demand since bicycle is not a necessity.