CHAPTER 5ELASTICITY AND ITS APPLICATION95little concern over his health, sailboats might be a necessity with inelastic demandand doctor visits a luxury with elastic demand.Availability of Close SubstitutesGoods with close substitutes tendto have more elastic demand because it is easier for consumers to switch from thatgood to others. For example, butter and margarine are easily substitutable. A smallincrease in the price of butter, assuming the price of margarine is held fixed, causesthe quantity of butter sold to fall by a large amount. By contrast, because eggs area food without a close substitute, the demand for eggs is probably less elastic thanthe demand for butter.Definition of the MarketThe elasticity of demand in any market de-pends on how we draw the boundaries of the market. Narrowly defined marketstend to have more elastic demand than broadly defined markets, because it iseasier to find close substitutes for narrowly defined goods. For example, food, a
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