Select a product and discuss factors that affect its price i

Select a product and discuss factors that affect its price, income, and cross elasticity of demand.

For example, if you select table salt, you could argue that since its price is low relative to income and it is generally considered a necessity, it has very inelastic price elasticity of demand. It has low or close to zero income elasticity of demand because people do not tend to consume more of it as income rises. The cross elasticity of demand between salt and salt substitutes would be positive because the products are substitutes. Foods that typically are used with salt would be complements, and they would have negative cross elasticity of demand.

Solution

We will select a product \"Sugar\"

The price of sugar is low and is easily available moreover it is very necesary commodity so it is very inelastic in terms of price elasticity.

Income elasticity of demand can be very low because people will not eat it more if income increases.

The complements and substitute are available in the market . It is complementary with many drinks moreover there are many substitutes available like sugar free etc. Which has saccrine and have better feature. This effects the market, moreover it being a very necessary comodity. Goverment also intervene in the rates and keep the rate low.

So it would have negative cross elasticity of demand