Question

based on only the information provided, characterize the demand for the following goods as being more elastic or more inelastic.
a. a 45 - cent box of salt that you buy once a year:

b. a type of high - powered ski boat that you can rent from any one of a number of rental agencies:

c. a specific brand of bottled water:

d. automobile insurance in a state that requires autos to be insured but has few insurance companies:

e. a 75 - cent guitar pick for the lead guitarist of a major rock band:

more elastic
more inelastic

Explanation:

Part a

Salt is a necessity with few substitutes, and the cost is low relative to income. So demand is more inelastic.

There are many rental agencies (substitutes), so if price of one agency's boat rises, consumers can switch. Thus demand is more elastic.

A specific brand of bottled water has many substitutes (other brands, tap water). So demand is more elastic.

Answer:

more inelastic

Part b