Choose the most elastic item in the list of food stuffs given in the Table 1.Table 1-Price elasticity of demand for select foodstuffs in India during 2022-23Food itemPrice elasticity Bread-0.30 Milk-0.11 Cheese-0.40 Fresh fish-0.73 Rice-0.07 Lamb meat-1.25 Fresh fish Rice Cheese Lamb meat
Question
Choose the most elastic item in the list of food stuffs given in the Table 1.Table 1-Price elasticity of demand for select foodstuffs in India during 2022-23Food itemPrice elasticity Bread-0.30 Milk-0.11 Cheese-0.40 Fresh fish-0.73 Rice-0.07 Lamb meat-1.25 Fresh fish Rice Cheese Lamb meat
Solution
The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. The more negative the price elasticity, the more responsive the demand for a product is to a change in price.
From the given table, the food item with the most elastic demand is the one with the highest absolute value of price elasticity.
Here are the absolute values of the price elasticities given:
Bread: 0.30 Milk: 0.11 Cheese: 0.40 Fresh fish: 0.73 Rice: 0.07 Lamb meat: 1.25
From these values, we can see that Lamb meat has the highest absolute value of price elasticity (-1.25), meaning it is the most elastic item in the list. Therefore, the demand for Lamb meat is most responsive to changes in price.
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