Question

Consider a product of your choice and apply the price elasticity of demand concept to it.

Answer 1

Product chosen: Salt

Price elasticity of demand: The demand of salt is price-inelastic. The reason is that whatever be the price, a certain amount of salt must be consumed. Even if its price increases it is not possible to decreases its consumption much. On contrary, if the price of salt decreases, consumers usually do not eat more salt. Thus, changes in the price of salt do not have much effect on its consumption. However salt is used in certain industrial processes such as tanning of leather. Thus, a decrease in the price of salt will lead to some rise in the amount purchased. But as the main part of the commodity produced is used for eating, thus total salt purchased will not increase much. Therefore, the demand is inelastic.