Question

The demand for salt is ______.
A.Inelastic
B.Elastic
C.Perfectly Elastic
D.Unitary Elastic

Answer 1

Hint: The price elasticity of demand for an item is a measure of how price affects the amount desired of it. When prices rise, demand for virtually all goods decreases, although it decreases more for some than for others. The price elasticity is the percentage change in quantity requested when the price is increased by one percent and all other factors remain constant. If the elasticity is -2, it indicates that a $1\%$ increase in price results in a $2\%$ decrease in amount demanded. Other elasticities are used to determine how the amount requested varies as a result of other factors (e.g. the income elasticity of demand for consumer income changes).

Complete answer:
When the price is chosen so that the elasticity is exactly one, the revenue is maximised. The elasticity of a good may also be used to estimate the impact (or "burden") of a tax on that good. Price elasticity is determined using a variety of research methodologies, including test markets, historical sales data analysis, and conjoint analysis. Perfectly Elastic Demand (infinite), Perfectly Inelastic Demand (0), Relatively Elastic Demand (> 1), Relatively Inelastic Demand (1) and Unitary Elasticity Demand (= 1) are the different types of price elasticity.
In economics, inelastic demand arises when a product's demand does not fluctuate as much as its price. For example, if a product's price rises $20\%$ but demand falls only $1\%$, the demand for that product is said to be inelastic. Inelastic demand occurs when consumers buy about the same amount of a product or service regardless of price changes. This occurs with items that people require, such as gasoline and food. Even if the price rises, drivers must purchase the same quantity. Similarly, even if the price decreases, people don't purchase much more.
The demand for salt is inelastic because the demand for salt remains constant regardless of price changes. Inelastic demand is most commonly found for essential products such as salt, sugar, and milk.
Hence option A is correct.

Note:
For most commodities, the higher the elasticity, the longer a price shift lasts, as more customers discover they have the time and willingness to look for alternatives. When fuel prices rise suddenly, for example, consumers may continue to fill up their empty tanks in the short term, but if prices remain high for several years, more consumers will reduce their demand for fuel by carpooling or taking public transportation, investing in more fuel-efficient vehicles, or taking other measures.