Consider these 3 items: coffee, Folger\'s Coffee, and hot beverages. Which item
ID: 1220925 • Letter: C
Question
Consider these 3 items: coffee, Folger's Coffee, and hot beverages. Which item will have the highest elasticity of demand? Which item will have the lowest elasticity of demand? For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value). Insulin for a diabetic or aspirin for someone suffering a headache. A new Whirlpool 27 cu. ft. side-by*side refrigerator or electricity to power your all-electric home. A can of Red Bull or soft drinks in general. If 800 units are sold at a price of dollar 120 and 240 units are sold at a price of dollar 180, what Is the absolute value of the price elasticity of demand? Use the midpoint formula. Which of the following pairs of items will have a negative cross-price elasticity, which will have a positive cross-price elasticity, and which will have zero cross-price elasticity? Beef and pork Air travel and weed killer Shampoo and conditionerExplanation / Answer
Q1. Number of substitutes an item have, in part, determines whether the item will have high elasticity of demand or low elasticity of demand.
An item that have many or large number of substitutes has high elasticity of demand. On the other hand, an item that have fewer substitutes have low elasticity of demand.
Out of all given items, Folger's Coffee has highest number of substitutes. This is because this is a brand of coffee and like this there are many other brands like Starbucks, Green Mountain, Caribou, Millstone etc. are available in market. Thus, it have many substitutes.
Coffee as a variant of hot beverage has comparatively fewer substitutes like tea, soup etc.
Hot beverages as an item category has least number of substitutes like cold beverages.
(a) As Folger's Coffee has highest number of substitutes, it will have the highest elasticity of demand.
(b) As hot beverages has lowest number of substitutes, it will have the lowest elasticity of demand.