Question

What determines the price elasticity of demand for Brazil nuts?

Answer 1

Determinants of price elasticity of demand for Brazil nuts :

1. Availability of close substitutes:

Price elasticity of demand tends to be high for goods that have close substitutes. Brazil nuts have close substitutes that provide almost the same nutritional value and so the price elasticity of demand for Brazil nuts is high; a slight increase in the price of Brazil nuts causes consumers to switch to other substitutes like pecans, walnuts.

2. Price of the good:

The price of the good is an important determinant of elasticity of demand. If the price of a good rises, consumers will decrease the quantities bought or stop buying the good altogether. In 2017, the harvest of Brazil nuts hit a slump due to poor rains across South America which led to a surge in the price of the nut.

3. Type of good:

The elasticity of luxury goods is higher than essential goods. Brazil nuts are classified as a luxury good as they possess high nutritional value and are the edible seed of a large tree that's native to the Amazon rainforest. The specific ecological environment of the Amazon rainforest is crucial for the nut to develop on the tree; the ecology is so complex that can not be replicated elsewhere. Thus, Brazil nuts are generally expensive to buy which makes them a highly elastic good.