Why are materials that represent only a small percentage of the total cost of manufacturing a product more likely to have inelastic demand than major components?
What will be an ideal response?
Inelastic demand means the demand stays the same for a component no matter how its price changes. For a smaller component part, the costs of finding a new supplier would probably outweigh any benefits to be gained from paying less. As the price of the component part becomes a larger percentage of the item, there is a point where it is cost-effective to find a new, less expensive supplier.
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A) changing of name of the country. B) changing the national flag. C) excessive loans from the International Monetary Fund (IMF). D) participation in the WTO (World Trade Organization). E) excessively high taxes on business operations.
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