With elastic demand, a tax will cause only a small rise in price. Also, if flights increase, people may not be able to afford it and will choose to take their holiday in the UK. An increase in the price of flights from London to Paris would encourage people to take the Channel Tunnel. Note – if chocolate in general increased in price, demand would be inelastic, but for particular types of chocolate demand is elastic.
Dairy milk chocolate bar – there are many other types of chocolate bars to choose from.If Tesco tea increased, there would be many alternatives to choose from. There are many alternative types of tea which we can drink. If we bread every day, we may be more sensitive to changes in price. If the price goes up, fewer people will be able to afford it. Luxury goods which are a high percentage of income will be more sensitive to price. Related to the first point if markets are very competitive then demand will be more sensitive to price, and therefore demand will be more elastic For example, if the price of one type of mineral water (Vittel) increases, people can easily switch to other brands. If consumers have many alternatives, demand will be more sensitive to price. Goods which are price elastic will tend to have some or all of the following characteristics.
Demand is price elastic if a change in price causes a bigger percentage change in demand.
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