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#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4
Certainly, whether the good or service is seen to be non-discretionary or discretionary would help determine its sensitivity to a price change. Faced with the same percentage increase in prices, consumers are much more likely to give up their Friday night restaurant meal than they are to cut back significantly on staples in their pantry. The more a good is seen as being necessary, the less elastic its demand is likely to be.
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4.1. Own-Price Elasticity of Demand
n price falls, they might decide to go ahead and make the purchase. If the price of washing machines were to stay low forever, however, it is unlikely that a typical consumer would buy all that many more machines over a lifetime. <span>Certainly, whether the good or service is seen to be non-discretionary or discretionary would help determine its sensitivity to a price change. Faced with the same percentage increase in prices, consumers are much more likely to give up their Friday night restaurant meal than they are to cut back significantly on staples in their pantry. The more a good is seen as being necessary, the less elastic its demand is likely to be. In summary, own-price elasticity of demand is likely to be greater (i.e., more sensitive) for items that have many close substitutes, occupy a large portion of the total bu


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