In general, the price elasticity of demand for a product will be greater (a) the larger the number of close substitutes, (b) the greater the share ofbudget an item takes, (c) the more the item is considered to be a luxury, and (d) the narrower the market is defined (for example, a specific brand name vs. an entire market).Costco (www.costco.com) posts its sales (discount) items.Select at least 5 sales items, and evaluate the price elasticity of demand for each item.

Professor gave some examples in order to complete this assignment.

When looking at the discount products offered by Costco, it can be seen that nearly all products are considered to be elastic. All of the products either have broad availability of substitutes or narrow market. It makes sense how Costco promotes items that have higher price elasticity for demand therefore it will attract more customers. The 5 items chosen below will show how the items are considered to be elastic.

1. Khombu Active Sandal

From Costco website, Khombu Active Sandal has $4 off. This product is considered to be elastic because it has a narrow market specifically for those who do outdoor activities. If the price of this item increases, potential consumers may switch to other brands or other alternatives such as shoes that have the same function. Also, it is considered as elastic due to availability of close substitutes. Maybe not as many but still available for potential consumers to find alternative.

2. Folgers Classic Roast Ground Coffee

Folgers Classic Roast Ground Coffee has $2.25 off. Even though the discount is not that much but this item is elastic because it has a lot of other close substitutes. Since there are a lot of other competitors and many substitutes that gives in caffeine such as tea, energy drinks and cocoa, consumers are likely to switch to these substitutes that will give the same effect when the price of coffee increases.

3. Chinet/Hefty Diamond Plates

These specific brands of plates are on the same promotion which has $5.40 off. This item is elastic also because of many alternative substitutes. The use of plates is usually for parties for people to eat. However, consumers may find a lot of other substitutes such as bowl or plates that are made of different material. Therefore, this item is elastic in which consumers have wide range of options.