Final answer:
The elasticity of a smartphone can change over time, being highly elastic when it's a new model and less elastic as it becomes older. Higher priced goods and those with many substitutes usually have higher elasticity, which is crucial for pricing strategies and revenue implications.
Step-by-step explanation:
Price elasticity of demand refers to how sensitive the quantity demanded of a good or service is to a change in its price. A classic example of a product that may change in elasticity over time is technology, such as a smartphone. When a new smartphone model is released, it is typically seen as a luxury good with high price elasticity; consumers are very responsive to price changes. However, as the product becomes older and more models enter the market, the same smartphone may become more of a necessity with fewer substitutes and therefore less elastic.
As another factor, higher priced goods like sports vehicles tend to be more elastic than inexpensive goods such as bread or pencils. Pricing strategies must consider such changes in elasticity, especially in terms of how it relates to revenue and profits over both the short and long run. Goods with many substitutes or that take a large share of individuals' income, such as Caribbean cruises, typically display highly elastic demand curves.