Answer to Question #126716 in Microeconomics for Mpho

Question

Elasticity of demand for biltong is estimated to be 1.89 .
Identify any six factors that can impact the price elasticity of demand for biltong ,and explain how each one can be applied to achieve this elasticity coefficient.

Answer 1

i)                  Existence of close substitutes

When Biltong increases the price for its products, the consumers can switch to alternative products, which creates an elastic demand.

ii)                The proportion of income spent on goods.

When the proportion of income spends on Biltong's goods is higher, the elasticity is more significant. Increased prices reduce the demand for goods by consumers.

iii)              The durability of the products

The organization should focus on producing goods that can last longer because consumers may purchase more, especially if there is a possibility of the price increase.

iv)              Duration for switching between products

Biltong has elastic products; hence the consumers take longer to adjust to alternative products upon an increase in price.

v)                 The number of uses for the product

Cheaper products have several uses; hence decreased price increases the demand and elasticity.

vi)              The frequency of using the products

Consumers that are used to Biltong's products may respond positively upon an increase in the price, increasing the elasticity.