For each of the following pairs of goods or services, identify the one for which the price elasticity of demand



For each of the following pairs of goods or services, identify the one for which the price elasticity of demand is greater and explain why:

1 - Coffee; Starbucks Coffee

2 - Tuition at a public university; tuition at a private university

3 - Emergency room medical service; annual physical exam

4 - Movies during afternoons; movies at night

5 - Prescription medicine; over-the-counter medicine


1. Starbucks coffee has greater elasticity of demand. People are going to drink some coffee no matter what, so if the price of all coffee goes up there still wont be a huge change in quantity demanded. but if starbucks starts charging higher prices, a lot of starbucks customers will go to different coffee shops instead, so quantity demanded of starbucks will change a lot.

2. Tuition at a private university has a greater elasticity of demand than that at a public university. this is for the same reason as the starbucks vs normal coffee one. public university is cheaper than private, and if people want to go to public university they will still go if tuition goes up a bit as long as its still much less than private, because they just want a university degree in general. but if private university tuition goes up, a lot of the people who were willing to pay more for private university will decide that now the price is just too high compared to public and they will decide to go to public university instead.

3. annual physical exam is more elastic because, in an emergency, those people really need that ER medical service regardless of the cost. like if you break your leg, you are going to go get a cast so it can heal without wondering “hmm is it really worth it?” But if someone is a generally very healthy person and doesn’t have any medical issues, and the price of an annual physical exam goes up, he or she might wonder “hmm do i really need to pay this crazy price for someone to tell me everything is fine?” and he or she may not go get a routine physical.

4. movies during the afternoons are more elastic because it’s a less planned thing normally. if you walk by a movie theater and consider going to see a film but the price is super high, you might decide to do something else with the rest of your day. and in general afternoon movies have much less demand. movies at night, however, are more of a planned thing that youre going to do no matter what. if you are planning to meet a date at the movies at 10, even if the movie is expensive, you probably will still see it instead of leaving.

5. OTC medicine is more elastic because they treat much less serious medical issues, like a headache, and there are a lot of other ways to get that relief, like taking a nap and getting hydrated. prescription medicine on the other hand is much more of a necessity. if you have asthma, you need to get your inhaler. if you have diabetes, you need to get your insulin. if the price goes up, you will be annoyed but still purchase it.