Question

1. In a very poor village there is only 1 food available: rice. People consume 1500 calories of rice even if the price goes up 1 %. Demand for rice is perfectly: a. Inelastic b. Elastic 2. Brand wars are very competitive because brands are close substitutes. As a result, demand for brands in a brand war tend to be very: a. Elastic b. Inelastic 3. There are very few substitutes for vegetables as a whole. As a result, if fertilizer prices increases cause all vegetables prices to go up by the same amount, people do not reduce their vegetable consumption very much. Therefore the demand for vegetables (in the aggregate) tends to be: a. Elastic b. Inelastic 4. The table in your online lesson "Market Power by Food Manufacturers," is a measure of own-price elasticity of demand. All these elasticities are less than 1 meaning that if there is a 1% increase in prices, demand will fall by less than 1%. This means that for every single one of these industries, the demand is: a. Elastic b. Inelastic 5. Pet Food is the industry in the table that has the least price responsive consumers, meaning their demand is very: a. Inelastic b. Elastic

Answer 1

1. Ans: Inelastic

Explanation:

Demand is said to be perfectly Inelastic, if there is no change in the quantity demanded of a good even if price changes. In the above case, price increases by 1% but quantity demanded doesn't change. So, demand is perfectly Inelastic.

2. Ans: Elastic

Explanation:

If more number of substitutes are available for a good, demand is said to be more elastic.

3. Ans: Inelastic

Explanation:

Same explanation as given for no.1

4. Ans: Inelastic

Explanation:

If PED is less than 1, demand is said to be elastic, and if PED is greater than 1, demand is said to be inelasIne. If PED is equal to 1, demand is said to be unitary elastic.

5. Ans: Inelastic

Explanation:

Least price resposive means demand is inelastic.