Goods that are considered to be needs tend to be:

Goods that are considered to be needs tend to be:

A. Elastic when the price changes.

B. Inelastic when the price changes.

C. Elastic when the supply changes.

D. Inelastic when the supply changes.

Answer: B.Inelastic when the price changes.

Necessities or basic needs have relatively inelastic demand. This implies that there is little response to price changes in demand quantity. There are a few reasons for this:

Primarily, basic needs such as food, water shelter and healthcare are things without which a person cannot live. Even if the price increases, people will still pay for these commodities instead of going without them. The response to the price change is not much high.

Second, there are no nearby substitutes for essentials. When the price of bread is increased, you have no choice but to substitute it with some other commodity. This is unlike the substitutes of luxury goods – if a high priced purse becomes too expensive you are free to settle for an affordable one.

Third, essentials consume much of the individual’s earning. Therefore, when the price shifts it becomes hard for consumers to significantly adjust their quantity demanded. For instance, in case energy prices increase households may not consume significantly less electricity.

In conclusion then, the demand for necessities is inelastic because such goods are necessary and have no close substitutes while taking a huge proportion of consumer spending. Consumers will still be buying necessities in almost consistent quantities despite the variations of prices. This causes necessities to exhibit inelastic demand.