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Why Would The Price Of Demand For Eggs Appear To Be Inelastic?

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Question 1: The price rise is the result of the market attempting to establish a new equilibrium price. In figure 1, the supply changes for S0 to S1 as “producers scramble to meet new free-range laws”(Mannix 2016), which causes the supply curve to shift left, increasing the cost of producing eggs at each price. This increases the cost of eggs supplied at each price. Meanwhile, the demand curve shifts from D0 to D1 has changed “on the back of high beef prices which are encouraging people to switch proteins”(Mannix 2016) and according to Egg Farmers Australia “the new scientific consensus about links between eating eggs and better health outcomes”(Mannix 2016). The 3-4% increase in demands shifts the demand curve to the right, increasing the quantity of eggs demanded at each price. The price of eggs will have …show more content…

The effect of the price hike seemed to have little influence on the demand for eggs which would indicate the demand is inelastic. Moreover eggs are a perishable good that cannot be stored which demand for tends to be inelastic. Further evidence the demand for eggs is inelastic is that even though the price of eggs has increased; all the eggs supplied have been consumed leaving “supermarket shelves along the east coast that would usually stock eggs are bare” (Mannix 2016). This would indicate that revenue will have increased for egg producers and if price and revenue move in the same direction, the demand for the good is inelastic, which is expected as most food items are generally inelastic. ‘Price elasticity of demand’ = ‘percentage change in quantity demand’ ‘Percentage change in

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Some examples that are inelastic are keyboards and pens. This concept of things being elastic or inelastic can also be incorporated into macroeconomics. Price elasticity of demand refers to the responsiveness of the consumers to a price change. For example some products that consumers are highly responsive to would be buying coffee at a coffee shop because a small price change can affect a large change in the quantity purchased. Since this product is highly responsive it correlates to this product being elastic.

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“The equilibrium process is so powerful that it is often referred to as the law of supply and demand, the idea that market prices adjust to brig nth quantity supplied an the quantity demanded into balance” (Mateer and Coppock, 2018, p 95) Even though Netflix is raising prices a new equilibrium will be established since it is shifted up with the price increase and then the quantity staying the same. This results in the demand being inelastic but if there was a significant price increase that would change. “You can also tell whether the demand for something is inelastic by looking at the demand curve. Since the quantity demanded doesn't change as much as the price, it will look steep.”

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We expect food to have the highest sticker price increase, since the elasticity of demand for food is the lowest. The demand for 2% milk is likely to be quite elastic, since 1% milk and whole milk are close substitutes. Sellers of 2% milk will have a difficult time shifting the burden of the tax onto consumers, and the sticker price will be little changed. The demand for all dairy products will be somewhat elastic, since there are some substitutes available for these products: meats, soy and rice milk, and peanut butter can replace some dairy products in some parts of a person’s diet, for example. But the demand for dairy products is less elastic than the demand for 2% milk, so consumers will see some rise in the sticker prices of dairy products.

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