Question

Explain how the elasticity for peanut butter is different from the elasticity for Jiff’s Peanut butter?

Answer 1

The number of substitutes for JIff's peanut butter is greater than that for peanut butter. This means that if price of Jiff's peanut butter increases, consumer can shift to another brand of peanut butter. However, if price of peanut butter increases then consumers will have to shift to some other good.

Hence, consumers would be more sensitive to change in price of a Jiff's Peanut butter rather than price of peanut butter. So the price elasticity of demand of JIff's peanut butter would be higher than price elasticity of demand of peanut butter.