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Problem:

Pick a product and Describe factors which affect its price, cross elasticity of demand, and income.

For illustration, if you pick table salt, you could argue that since its price is low relative to income and it is basically considered a necessity, it has extremely inelastic price elasticity of demand. It has low or close to zero income elasticity of demand since people don’t tend to consume more of it as income rises. The cross elasticity of demand between salt and salt substitutes would be positive since the products are substitutes. Foods that characteristically are employed with salt would be complements, and they would’ve negative cross elasticity of demand.

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M914091

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