When is a product likely to have inelastic demand?

A product is likely to have inelastic demand when consumers view it as a necessity because necessities are items that people need to maintain their standard of living or to meet basic needs. When consumers perceive a product as essential, they are less sensitive to price changes; an increase in price does not significantly reduce the quantity demanded.

For example, medications, basic food items, and utility services tend to fall into this category. Even if prices increase for these goods, consumers will continue to purchase them because they cannot easily substitute them with another product or forgo their consumption. This underlines the fundamental economic principle that demand is inelastic when consumers have few alternatives and their need for the product is strong.

In contrast, products with many substitutes, luxury goods, or seasonal items generally exhibit more elastic demand because consumers can easily switch to alternatives or modify their purchasing behavior based on price changes.