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I understand the formula for elasticity but not why some goods are naturally elastic and others inelastic. Can someone explain the real reasons?
The elasticity of a good depends on several factors. Salt has inelastic demand because it is a necessity, forms a very small part of total spending, has no close substitutes, and is consumed in fixed small quantities; even if its price doubles, people buy almost the same amount. Branded clothes have elastic demand because they are comparative luxuries, take up a larger share of income, and have many substitutes (other brands or unbranded options). When the price of one brand rises, buyers easily switch to alternatives, so quantity demanded falls sharply. The main determinants of elasticity are: nature of the good (necessity versus luxury), availability of substitutes, proportion of income spent, number of uses, and time period. Goods with substitutes and high income share tend to be elastic, while essential goods with few substitutes are inelastic.
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