Question

A discount on Nutella has led to violent scenes in a chain of French supermarkets, as shoppers jostled to grab a bargain on the sweet spread. Intermarché supermarkets offered a 70% discount on Nutella, bringing the price down from €4.50 (£3.90) to €1.40. But police were called when people began fighting and pushing one another. "They are like animals. A woman had her hair pulled, an elderly lady took a box on her head, another had a bloody hand," one customer told French media. A member of staff at one Intermarché shop in central France told the regional newspaper Le Progrès: "We were trying to get in between the customers but they were pushing us." All of its stock was snapped up within 15 minutes and one customer was given a black eye, the report adds. Similar scenes have been reported across France, with some being described as "riots". The hunt for discounted jars continued on Friday, with shoppers in a supermarket near Toulouse being handed just one each.
Explain clearly what this tells us about the elasticity of the product.
Sketch a supply demand curve to explain what happened.

Answer 1

Answer 1) In this case, a huge increase in demand of Nutella product following a discount of 70 percent on Nutella by Intermarché explains demand for this product is highly elastic. How demand and/or supply of a product reacts to a given change in prices of that product defines the price elasticity.

The price elasticity of demand is defined as:

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

Thus, the quantity demanded for Nutella product as a result of discount resulting in a drastic increase in demand for Nutella describes Nutella product to be elastic in nature. In short, change in quantity demanded for Nutella exceeded the change in prices.

Graphical representation of Relative elastic demand