Price elasticity is an economic measure of how responsive the demand for a particular product is to a change in its price Specifically, it is calculated as the percentage change in quantity demanded divided by the percentage change in price. As a general rule, highly elastic goods are those where a small change in price leads to a large change in demand. In other words, the demand for these goods is very sensitive to variations in the price.
The five best examples of products that are price elastic are cigarettes, luxury goods, food staples, gasoline, and technology products.
Cigarettes: Cigarettes are highly elastic due to the price-sensitivity of tobacco smokers as well as the large number of brands available. The demand for cigarettes is highly sensitive to changes in the price of cigarettes, as smokers are likely to switch to other brands when prices go up.
Luxury Goods: Luxury goods such as jewelry, designer clothing, and high-end electronics are also highly elastic. This is because people generally purchase these items for the status that they provide, rather than for functional purposes. Therefore, a small increase in the price leads to a large decrease in the demand.
Food Staples: Food staples such as rice, wheat, and other grains are also highly elastic. This is because a large proportion of the population is price sensitive and can easily switch to other competing items when prices rise.
Gasoline: The demand for gasoline is also highly elastic, since consumers are highly price sensitive. A small increase in the price of gasoline leads to a large decrease in the demand for it, as people switch to other forms of transportation or try to find better deals.
Technology Products: Technology products such as smartphones, laptops, and tablets are also highly elastic. This is because they are relatively expensive and considered luxury items. Therefore, a small increase in their prices leads to a large decrease in their demand.