common-close-0
BYDFi
Trade wherever you are!

How does the concept of normal vs inferior goods elasticity apply to the valuation of digital currencies?

avatarLynn LiebertDec 26, 2021 · 3 years ago1 answers

In the context of digital currencies, how does the concept of normal vs inferior goods elasticity impact their valuation? How does the demand for different types of digital currencies change with changes in price? How does the elasticity of demand for digital currencies affect their market value?

How does the concept of normal vs inferior goods elasticity apply to the valuation of digital currencies?

1 answers

  • avatarDec 26, 2021 · 3 years ago
    The concept of normal vs inferior goods elasticity is applicable to the valuation of digital currencies. When the price of a digital currency increases, the demand for it may decrease if it is considered an inferior good. Conversely, if a digital currency is considered a normal good, the demand may increase with a decrease in price. The elasticity of demand for digital currencies influences their market value. If the demand is elastic, even a slight change in price can lead to a substantial change in demand and, consequently, the market value of the digital currency. However, if the demand is inelastic, the market value may not be significantly affected by price changes.