Question

If the price of organic beef steak, regular beef steak, and pork chops each increased by 10%. Which of the products would you think was the most elastic. In other words, which has the most change to the quantity demanded because of the increase in price?
a. organic beef steak

b. non-organic beef steak

Answer 1

Answer: Non Organic beef steak

Explanation:

Elasticity of demand measures the sensitivity of a demand for a good to change in price changes. Substitute is another factor that affects the demand of a good in question. There is a positive relationship between Substitute product and the demand of the good in question. An increase in the price of a good in question will increase the demand for the substitute product and a decrease in the price of a good in question will decrease the demand for the substitute product  since consumers have a choice because they can easily substitute one product with another product.

We assume that consumers buy non organic (regular) beef steak regularly, Regular Beef steak is therefore more sensitive to price changes because regular beef steak has a very close substitute which is the organic beef steak. A good that has a close substitute product is said to be more elastic or more sensitive to prices because when the price increases consumers will change and buy the substitute product, consumers have a choice. when the price of regular beef steak increases consumers will buy the substitute product which is the Organic Beef steak