Suppose the price of two products, toothpaste and new cars, rose by 5%. For which good do you think the quantity demanded would be more affected? In other words, for which of these two goods is demand more elastic?

   It turns out that the demand for new cars would be much more affected; that is, the demand for new cars is more elastic than the demand for toothpaste. Why might this be?

   One reason might be that a 5% change in the price of toothpaste might not even be noticed, since many people may not even recall what they last paid for toothpaste. However, a 5% increase in the price of a car can be a significant amount of money; enough in some cases to make the car unaffordable, and most people remember what they paid for every car they ever purchased.

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