But after enough time people will be able to adjust and use coal or cooking gas

But after enough time people will be able to adjust

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rises, it may be difficult to substitute fuel oil by other types of fuels such as coal or cooking gas. But after enough time people will be able to adjust and use coal or cooking gas instead of the fuel oil whose price has risen. Likewise, when the business firms find that the price of a certain material has risen, then it may not be possible for them to substitute that material by some other relatively cheaper one. For Volkswagen the factor of time tends to make the demand more inelastic, because normally people need their car and if they cannot use it anymore or stop to use it, they do not have a huge amount of time to find a substitute, such as when a car is necessary to go to work. Nevertheless, this depends on the regions within people live. However, the overall factor of time tends to have a positive effect for Volkswagen, due to the notion that time does make the demand for cars inelastic. 4.3 Functionality The greater the number of uses to which a commodity can be put, the greater will be its price elasticity of demand. If the price of a commodity having several uses is very high, its demand will be small and it will be put to the most important uses and if the price of such a commodity falls it will be put to less important uses also and consequently its quantity demanded will rise significantly. To illustrate, milk has several uses. If its price rises to a very high level, it will be used only for essential purposes such as feeding the children and sick persons. If the price of milk falls, it would be devoted to other uses such as preparation of curd, cream, ghee and sweets. Therefore, the demand for milk tends to be elastic. The possibilities of usage for the cars of Volkswagen is quite small, more precisely most of the car models have one use and this is to bring the consumer from A to B. Of course, there are a few models (Caravans) which offer the possibility to sleep inside but just for a few days. This means in the case of VW the factor functionality tends to make the price more inelastic in the case of VW because overall there is just one use for it. All in all, this means for Volkswagen that functionality is not that important for Volkswagen.
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4.4 Necessities and Luxuries The elasticity of a good is highly dependent on its nature. That means that elasticity differs between commodities that are considered necessities and those that are considered luxuries. Necessities (salt, bread, newspaper, etc.) tend to have an inelastic demand, since its consumption can’t be postponed. The consumption of luxury goods, on the other hand, can easily be postponed. Therefore, the demand is more elastic. Cars are generally referred to as a luxury goods. The purchase of cars can normally be postponed for a very long time. Only in very rare cases buying a car is something urgent. Therefore, consumers are sensitive to changes in price and rather wait a little with purchasing a car if the current price is relatively high. Thus, this driver is in favor of an elastic demand.
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  • Winter '18
  • Renault, Volkswagen, Porsche, Volkswagen Group, Scania

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