Question

The Determinants of Price Elasticity:

A Summary

The price elasticity of demand depends on:

●the extent to which close substitutes are available.

●whether the good is a necessity or a luxury.

●how broadly or narrowly the good is defined.

●the time horizon—elasticity is higher in the long run than the short run.

What is the research about: Jasmin Rice

Use the ideas learned about demand and price elasticity of demand (and particularly the four key factors that determine price elasticity of demand to discuss the expected price elasticity of the product you are assigned. Indicate what you expect the price elasticity of demand of the product to be (e.g. Elastic or inelastic). Support your view on the expected price elasticity by discussing the various variables likely to affect its elasticity:

Aspects to cover in your report:

Your discussion should include (but not limited to) the following:

-what other products are likely to compete with it, and how this will affect its price elasticity

-is the good a necessity, or not

-how has the good/market been defined

-cite relevant studies or reports that might have computed or analyzed elasticity of the product or related product. Make sure to reference all the studies or reports cited. At least four published articles must be cited and referenced.

Length of Report:

The Report should be between one and two pages maximum not counting the reference section (use font 12, double space).

Outline of the research project:about Jasmine Rice

You must provide:

1. Introduction section explaining what price elasticity is.

2. Discussion section about the expected price elasticity of good assigned to you, with any supporting evidence from other research or reports

3. A reference section listing all reports, books, articles etc. that are cited (at least four).

Answer 1

Price elasticity of demand is the degree of responsiveness in terms of desire for the product, as the price changes. If the price rises, than people will desire less while if the price reduces, then people will demand more. Price elasticity of demand is high when demand changes when the price changes, price elasticity is low when demand does not change even when price changes.

Jasmine rice is a healthier version of white rice as it contains more fiber. There are other varieties of rice also available such as Basmati, and popcorn rice. Thus even if Jasmine rice has several substitues, it is comparatively cheaper than Basmati rice. If one doesn't get Jasmine rice then he/she can always opt for other variants of Rice. Thus it is not a luxury good, but nor is it a necessity as people can adjust to different diets. Although Jasmine rice is broadly defined in the rice category as fibrous, it has a fragrant smell, and is a healthy alternative. Thus price elasticity will be higher for Jasmine as it is not necessarily a necessity, people can opt for other goods, so if the price increases, the demand will reduce and not be the same. Elasticity will be higher in the long run as people will opt for other alternatives and completely take over the market if Jasmine rice turns out to be overexpensive. It all depends on variables such as taste, preferences and income of individuals. If per capita income is high, then the price elasticity will be lower, but if income is low, then price elasticity of demand will be higher as people will opt for other alternatives.

Reference: MarketWatch, Mordorintelligence, finecooking, ricejournal, fao organisation