Part 1: Elastic, Inelastic, or Unitary Demand for Products
(a) Beef: Elastic
Explanation: Beef is a non-essential good with substitutes (e.g., chicken, pork). If the price of beef rises, people can switch to other meats, making its demand elastic.
(b) Steak: Elastic
Explanation: Steak is a luxury good with many substitutes (other meats or food options). A price increase would lead to a significant decrease in demand.
(c) Public Transportation: Inelastic
Explanation: Many people rely on public transportation for commuting and have few alternatives, especially in urban areas. Price changes won't significantly impact demand.
(d) Gasoline: Inelastic
Explanation: Gasoline is often a necessity for transportation. There are limited substitutes, so demand remains relatively steady despite price changes.
(e) Pencils: Inelastic
Explanation: Pencils are inexpensive and take up a small portion of the budget. Even if the price increases, it won't significantly affect demand.
(f) Housing: Inelastic
Explanation: Housing is a necessity, and there are few alternatives for shelter. While prices impact affordability, people will still demand housing regardless of price changes.
Part 2: PED Coefficient and Sales Strategy
Case 1: PED = 1.5 (Elastic Demand)
Strategy: Lower the price
Explanation: When demand is elastic, a decrease in price leads to a proportionately larger increase in quantity demanded, increasing total revenue.
Example: If the price drops by 10%, quantity demanded might increase by 15%, boosting overall revenue.
Case 2: PED = 0.8 (Inelastic Demand)
Strategy: Raise the price
Explanation: When demand is inelastic, a price increase leads to a smaller percentage decrease in quantity demanded, increasing total revenue.
Example: If the price increases by 10%, quantity demanded might drop by only 8%, resulting in higher overall revenue.