Question

Which of the following situations is the most likely to have the lowest price elasticity? MULTIPLE...

Which of the following situations is the most likely to have the lowest price elasticity? MULTIPLE CHOICE:

A new soft drink product that faces many competing substitutes.

A wireless data plan with 2-year contract

Perishable produce

A product that faces new customers

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Homework Answers

Answer #1

The perishable goods are supposed to have inelastic demand.

Price elasticity of demand is given as:

Price elasticity of demand = - (% change in Quantity demanded / % change in prices)

Now, the demand for perishable goods would be inelastic as the quantity demanded of perishable goods can't be increased or decreased that easily just because of a change in prices. The perishable goods are to be consumed earlier and their consumption cannot be postponed due to their nature of perishability.

Thus, even if there is a huge or small change in prices, the quantity demanded change cannot be changed a lot. Thus, the price elasticity of demand is very low or inelastic.

Thus, Perishable goods are most likely to have the lowest price elasticity.

3rd option is the correct answer

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