Answer to Question #7884 in Economics of Enterprise for Christina
Which do you think has the most inelastic demand: perfume, salt, penicillin, cigarettes, ice cream, chocolate ice cream? Why?
The inelastic demand is the demand, which tends to remain unchanged despite the changing market conditions and prices. Thus, penicillin antibiotics have the most inelastic demand. They are historically significant because they are the first drugs that were effective against many previously serious diseases. When people want to be healthy they will take these antibiotics. There just few substitutes. That's why even if the price of them increase, there is little that the consumer can do, he still needs to buy them, as he needs it. Hence, little or no changes in the quantity demanded for the penicillin antibiotics even if there are changes in the price. As for other items people could live without them or use substitutes: the perfume is elastic demand (the change in price will reduce demand for it), salt - inelastic demand (some people could live not consuming it or use substitutes), Cigarettes will have an inelastic demand as well. As there is little substitutes and also people can be addicted to it. While ice cream will have an elastic demand. There can be quite a number of substitutes to it. If the price of the ice creams increase, immediately consumers will reduce the demand of them, and opt for substitutes.