Elasticity of Demand and Consumer Perception of other expenses.

Kingoffrogs

Poster
When the concept of the Elasticity of Demand is often discussed, the initial purchase price of a good is usually the only expense used to measure a good's change in demand relative to it's change in price.

Are there other expenses, such as maintenance/repair expenses that affect demand elasticity as well? Assuming a good is a luxury, and is sold by a firm that operates in a market that is in monopolistic competition, theoretically, if a consumer has information about maintenance and repair expenses, and has to choose between 2 goods, both have the same initial expense. However, Good A has an average maintenance expense of 10$/year, while good B has an average maintenance expense of 15$/year, wouldn't the consumer's demand for good A be more inelastic compared to their demand for good B? (Assuming this market operates in isolation, and remember in Monopolistic Competition the goods that are sold are differentiated products).

Or is the consumer's knowledge of maintenance/repair expenses generally lacking compared to their knowledge of initial expenses?
 
When the concept of the Elasticity of Demand is often discussed, the initial purchase price of a good is usually the only expense used to measure a good's change in demand relative to it's change in price.

Are there other expenses, such as maintenance/repair expenses that affect demand elasticity as well? Assuming a good is a luxury, and is sold by a firm that operates in a market that is in monopolistic competition, theoretically, if a consumer has information about maintenance and repair expenses, and has to choose between 2 goods, both have the same initial expense. However, Good A has an average maintenance expense of 10$/year, while good B has an average maintenance expense of 15$/year, wouldn't the consumer's demand for good A be more inelastic compared to their demand for good B? (Assuming this market operates in isolation, and remember in Monopolistic Competition the goods that are sold are differentiated products).

Or is the consumer's knowledge of maintenance/repair expenses generally lacking compared to their knowledge of initial expenses?
It is the duty of the buyer to know the costs associated w a product over the long haul. What are you try to get at?
 
What’s the opportunity cost if A is chosen over B?
I didn't give enough info to calculate opportunity cost as I didn't give an initial expense (I did say that the initial expense of both products are equal, though). I'm more concerned with whether other expenses beyond the initial expense affect the elasticity of demand for a certain good to any significant degree.

As far as my example goes, because I can also not quantify the utility of either product ( I find Cardinal Utility to be a silly concept anyways) there is no way to know the opportunity cost of choosing A over B or B over A.

Kindly correct me if I am wrong.
 
"Are there other expenses, such as maintenance/repair expenses that affect demand elasticity as well?"
Yes. If maintenance is 50% of original value per year people would be less likely to buy. Especially q higher value item. Ongoing expense for anything should be well bellow 10% of purchase price. This is a generalization and I'm not getting dragged in to bullshit to defend my stance by you
 

Donate 2025

Total amount
$400.00

Latest posts

Back
Top Bottom