In the Netherlands in 2018, there were $$\(1.3\)$$ bicycles per person and the world's largest underground bicycle parking area was built in the capital city. Land is scarce in city centres, where most cycling takes place. Demand for bikes in the Netherlands is price-inelastic. Only a few people in the Netherlands borrow money to buy bikes. The government encourages cycling by spending on both bike parking areas and leisure cycle parks. Explain two reasons why demand for a product may be price-inelastic.
Exam No：0455_m21_qp_22 Year：2021 Question No：3(b)
Answer:
Logical explanation which might include:
Lack of close substitutes (1) not able to switch to other
products if the price of the product rises (1).
A necessity (1) difficult to do without (1).
Takes up a small part of income (1) change in price will not
be significant (1).
Addictive (1) people find it difficult to stop consuming it (1).
New trend (1) brand loyalty being enforced by advertising (1).
Time / short period of time (1) may take time to find an
alternative (1).
Lack of close substitutes (1) not able to switch to other
products if the price of the product rises (1).
A necessity (1) difficult to do without (1).
Takes up a small part of income (1) change in price will not
be significant (1).
Addictive (1) people find it difficult to stop consuming it (1).
New trend (1) brand loyalty being enforced by advertising (1).
Time / short period of time (1) may take time to find an
alternative (1).
Knowledge points:
2.7.3 determinants of PED (The key influences on whether demand is elastic or inelastic.)
Solution:
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