3. Determine if the demand for the following products is price elastic or price inelastic, and explain your answer. In your explanation, be sure to include how the necessity of a good and the availability of substitutes affect the price elasticity of demand in each of these specific cases:

Question

• Gasoline as a commodity

• Gasoline sold at a local gasoline station

• Hotel rooms for people planning a vacation

• Hotel rooms for people on business to meet an important client

Answer 1

- Elastic (don't have to buy, investor can easily find substitute)

- Inelastic (no substitutes, you've just left home driving to work and your gas gauge is on E. you must buy it, your only choice is to not fill your tank completely).

- Elastic (very)

- Inelastic (e.g. absolutely need a 3-star or better hotel room in xxx city on xxx date)

In general,

"if you would purchase these products regardless of price...inelastic if yes, yes, elastic if no."