ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Salt is very expensive.
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Salt is not a necessity.
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Salt is very expensive to purchase.
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None of the above
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Detailed explanation-1: -Salt is inelastic because there are no good substitutes; it is a necessity to most people, and it represents a small proportion of most people’s budget.
Detailed explanation-2: -The demand for salt is inelastic because irrespective of the change in price, the demand for salt remains the same. Inelastic demand is usually seen for necessary goods like salt, sugar, milk etc.
Detailed explanation-3: -Inelastic products are usually necessities without acceptable substitutes. The most common goods with inelastic demand are utilities, prescription drugs, and tobacco products. Businesses offering such products maintain greater flexibility with prices because demand remains constant even if prices increase or decrease.
Detailed explanation-4: -The demand for salt is inelastic because the demand for salt remains constant regardless of price changes. Inelastic demand is most commonly found for essential products such as salt, sugar, and milk. Hence option A is correct.
Detailed explanation-5: -A luxury good or service is one whose income elasticity equals or exceeds unity. A necessity is one whose income elasticity is greater than zero and less than unity. Luxuries and necessities can also be defined in terms of their share of a typical budget.