Question

The good "breakfast cereal" is more likely to have an elastic demand than the good "Frosted...

The good "breakfast cereal" is more likely to have an elastic demand than the good "Frosted Flakes". True or False?

Homework Answers

Answer #1

True

  • For answering this question first and we need to understand the meaning of elastic demand
  • An elastic demand is that type of demand in which even there is a small change in the price can cause heavy change in the quantity demanded
  • In this the consumers are price sensitive
  • it means even there is a small increase in the price ,the quantity demanded falls drastically
  • if we talk about simple breakfast cereal then it will include any type of bread ,maize,oats etc
  • so it will have more elastic demand because in this the consumers have more choices of substitutes so if they find that the price of breakfast cereal price rises then they will move to another options
  • but in case of frosted flakes the consumers are not very much price sensitive and it is less elastic as compare to normal breakfast cereal
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