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Question
State whether demand will be Elastic or Inelastic. Give reasons for your answer.
The demand for salt by households.
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Solution
Because households only spend a relatively small percentage of their income on salt, their demand will be inelastic without near alternatives. The consumer will continue to purchase about the same amount of salt even if the price increases because it won't have much of an impact on their budget. As a result, there is no elastic demand for these commodities.
RELATED QUESTIONS
Explain the effect of the following on the price elasticity of demand of a commodity:
(i) Number of substitutes
(ii) Nature of the commodity
Choose the correct answer :
Perfectly elastic demand curve is _________.
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Group A
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Group B
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1. Cars and petrol
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a. Elastic demand
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2. Point method
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b. Complementary
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