Definition of the Market

The elasticity of demand in any market depends on how we draw the boundaries of the market. Narrowly defined markets tend to have more elastic demand than broadly defmed markets because it is easier to find close substitutes for narrowly defined goods. For example, food, a broad category, has a fairly inelastic demand because there are no good substitutes for food. Ice cream  a narrower category  has a more elastic demana because it is easy to substitute other desserts for ice cream. Vanilla ice cream  a very narrow category  has a very eiastic demand because other flavors of ice cream are almost perfect substitutes for vanilla.

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