P12

12.1 One characteristic regarding price elasticity: for most goods and services, the long-run demand is much more elastic than the short-run demand. For example, gasoline.

12.1.1 Durables goods, however, tend to behave in the opposite way. For example. washing machines.

12.2 Knowing whether the good or service is seen to be discretionary or non–discretionary helps to understand its sensitivity to a price change.

12.2.1 Faced with the same percentage increase in prices, consumers are much more likely to give up their Friday night restaurant meal (discretionary) than they are to cut back significantly on staples in their pantry ( non–discretionary).

12.2.2 The more a good is seen as being necessary, the less elastic its demand is likely to be.