Is the demand for food likely to be Price elastic or Inelastic?

Definition: Price elasticity of Demand (PED) measures the responsiveness of Quantity Demanded to a change in the good's price.Food is considered a basic necessity, we cannot live without it and therefore it is price inelastic. Thus, a significant rise in food prices will lead to an insignificant fall in the demand of food. Hence the PED for food will be a value between -1<PED<0 and the demand curve will be steeply downwards sloping, as shown in the diagram. Another cause of the inelastic PED for food is the lack substitutes available, meaning consumers have few alternatives to switch to. Finally, food consumption, for average UK households, only accounts for a small percentage of their overall income.The elasticity of food however, depends on the types of food. Luxury goods for example, are more elastic because they comprise of a large proportion of households. They can also be substituted for inferior goods; for instance, the more expensive Lindt Chocolate bar could be substituted for the cheaper Cadbury's Chocolate.

Answered by Frazer H. Economics tutor

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