Respond to the following response below:

• Identify the determinants of the price elasticity of demand.

Substitutability: This factor in determining price elasticity is how essential the product or service is and whether there are any substitutions for the product or service at a lower price.

Time:Time is another factor that can change price elasticity; the longer a unique service is made available, the more likely customers will get accustomed to the price, so long as no substitutes are sold at a lower price.

Size of the purchase:The saying "more bang for your buck" comes to mind as customers are more willing to pay for a product that provides more per dollar.

Necessity or luxury:Deciding whether a product is essential such as food or water, to live or if a product is made to comfort a way of living is also a determinant.

• Determine whether each of the following items is elastic or inelastic.

Bottled water:Grouping bottled water as a product instead of the individual company would make this product inelastic. Customers would be willing to pay for this product as it is an essential item.

Gourmet Coffee:The group of coffee would also consider this product inelastic.

Gasoline:Today, gasoline is the top fueling vehicle and machine supplier. Making this product inelastic. However, time can change this as many companies are researching substitute fuel sources. If, in time, different sources are made available for this source, this would cause the product to be elastic.

Apple cell phones:Apple is a major supplier, but not the only one. With many companies developing cell phones, this product would be considered elastic.

• Distinguish between a necessity and a luxury.

A necessity is a product or service essential for everyday living that customers do not think twice about paying for items such as water or food. Luxury is an optional product or service that provides a more comfortable living but is unnecessary, for example, expensive shoes or pricey cars.

• How are the price elasticity of demand and total revenue related? Why is the price elasticity of demand important to pricing?

Principles of Microeconomics (2nd ed.) (2019) explain that you can identify what would happen to the revenue if you were to increase or decrease the price of an item if you know the elasticity of the demand. Working together, you can maximize your profit or reduce your inventory by finding what price increase or reduction is more favorable to customersultimately being beneficial in revenue and inventory