What are the influences that make a good, price elastic?
Let’s review price elasticity of demand. A good or service is price elastic if consumers are very responsive to a change in price. Let’s use an Air Canada flight from Vancouver to Calgary as our example. Why would such a flight be price elastic? First, there are close substitutes. If the price of an Air Canada flight goes up by, say, 10 percent, we can expect a substantial reduction in seat sales for this flight. Consumers will try one of the regional, no-frills airlines (it’s not a very long flight) or consider taking a day to drive through the Rockies. Second, this is a relatively important purchase. If the price of airfare absorbs 25 percent of the traveller’s budgeted income for the week, then the consumer is likely to treat the service as price elastic. The same would certainly be true of the purchase of an automobile, a piece of furniture, or many professional services. Third, we will assume that time is a relatively unimportant factor. The more time a consumer has to shop around
