Definition
- Necessity
- A necessity is a good buyers feel they cannot do without, such as housing or electricity, so its demand is inelastic while non-essentials are more price-sensitive.
Example
Can you think of an example of necessity?
Estimates in the source put the elasticity of electricity at 0.2 and of restaurant meals at 2.27: a 10 per cent price rise cuts electricity use by 2 per cent and restaurant meals by 22.7 per cent.
Test yourself
Can you name the four determinants of price elasticity of demand?
Learn it properly: the module
Also in: Income and cross elasticity