Item4Item 4What are the major determinants of price elasticity of demand? Instructions: You may select more than one answer. Click the box with a check mark for correct answers. You must click to empty the box for the wrong answers.check all that applySubstitutabilityProportion of incomeLuxuries versus necessitiesTimeExcise taxesunansweredAvailability of complementary and substitute goodsunansweredInferior goods and normal goodsunansweredUse those determinants and your own reasoning in judging whether demand for each of the following products is elastic or inelastic:a. Bottled water b. Toothpaste c. Crest toothpaste d. Ketchup e. Diamond bracelets f. Microsoft's Windows operating system Prev

The major determinants of price elasticity of demand are:

1. Substitutability: The more substitutes a good or service has, the more elastic its demand is. If the price of a good rises, consumers can easily switch to a substitute, hence, demand is sensitive to price changes.

2. Proportion of income: If a good takes up a large proportion of a consumer's income, demand for it is likely to be elastic. This is because consumers will be sensitive to price changes.

3. Luxuries versus necessities: Necessities tend to have inelastic demand because consumers will buy them regardless of price. Luxuries, on the other hand, tend to have elastic demand because consumers can easily do without them if prices rise.

4. Time: The longer a price change remains in effect, the more elastic demand becomes. Over time, consumers can find substitutes or change their behavior.

5. Availability of complementary and substitute goods: If there are many substitutes available for a good, its demand is likely to be elastic. Similarly, if a good has many complements, its demand is likely to be inelastic.

6. Inferior goods and normal goods: Inferior goods have an inverse relationship with income. As income increases, demand for these goods decreases, hence they have elastic demand. Normal goods have a direct relationship with income. As income increases, demand for these goods also increases, hence they have inelastic demand.

Using these determinants, we can judge the elasticity of demand for the following products:

a. Bottled water: Elastic. There are many substitutes available (tap water, filtered water, etc.), and it's not a necessity.

b. Toothpaste: Inelastic. It's a necessity with few substitutes.

c. Crest toothpaste: Elastic. There are many other brands of toothpaste that consumers can switch to.

d. Ketchup: Elastic. There are many substitutes (mayonnaise, mustard, etc.), and it's not a necessity.

e. Diamond bracelets: Elastic. They are a luxury and take up a large proportion of income.

f. Microsoft's Windows operating system: Inelastic. There are few substitutes available, and it's a necessity for many people.