Show the impact on price elasticity of demand, Microeconomics

Q. Food purchases are relatively price inelastic since food is a necessity. If food is so required for life, how will we explain the heavy advertising of food items at the grocery stores -  how could that impact the price elasticity of demand for the distinct food products?

ANSWER:   It is possible for the demand for a general class of goods to be price inelastic (such as food in general) but for shopping at any given brand or for any given store to be very price elastic due to the large number of stores selling essentially identical goods, or due to the number of food items that will be substitutes for each other. For illustration, there are more than 10 different brands of yoghurt, and consumers can be very price elastic in terms of preferring to buy the brand of yoghurt which is on sale at a given store.

Posted Date: 7/22/2013 8:40:09 AM | Location : United States







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