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Excellent work on Q2 and the determinants of demand.

Q3 add on answer was going in the right direction, you just need to tie up the inelastic demand and price decrease with total revenue curve, then you will get the final answer.

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The consumption is not likely to change. For example, the consumer buy more eggs during a sale, but the consumer will not eat more eggs at one go. Eggs are bought in advanced so, she do not need to buy eggs for the next week, or following week.

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If the price goes down, will the consumer buy more bread and eggs? Most likely not, so is less price elastic.

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Necessities is less price elastic as it takes up less proportion of the income. So whether the price goes up or down, it doesn’t matter to the consumer.  .

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If something takes up a large proportion of our income, people will be more responsive.

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It refers to the responsiveness of a quantity demanded of a good to a change in its own price.

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The demand will be price inelastic meaning customers are unresponsive towards the price change in tomatoes .
Customers thus will not likely buy the tomatoes.

In conclusion , even with the drop in prices of tomatoes , customers are not responsive and will less likely buy . Farmers will thus feel unhappy as they are unable to sell their crops thus are unable to make any money

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Since the farmers has switched from planting flowers to tomatoes , the amount of tomatoes being grown increases greatly. This causes a surplus whereby the supply of tomatoes is more than the demand for tomatoes resulting in the vegetable glut.

This thus will cause a great drop in the prices of tomatoes. Tomatoes is a necessity thus will only take up a small portion of income thus the demand for tomatoes will be price inelastic .

Tomatoes being a necessity will result in the demand of tomatoes to be price inelastic.

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Glut= an excess of goods whereby supply exceeds demands

so it means excess of vegetables, supply of vegetables exceeds demand

By planting tomatoes instead of flowers , there are more tomatoes being grown thus supply of tomatoes increases greatly.

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Determinants Of Price Elasticity Of Demand

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Determinants Of Price Elasticity Of Demand

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Availability of substitutes
Habit
Time period
Necessity Vs Luxury
Proportion of income spent

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As tomatoes are introduced in Cameron Highlands, the demand for tomatoes are price elastic. Availability of substitutes from having only vegetables to having tomatoes make the farmers feel unhappy. Another possible reason might be Necessity Vs Luxury because having food (tomatoes) than having a luxury to view beautiful flowers is more important in life. Although the farmers help to implement a new substitute for food in Cameron Highlands, some of the farmers  got to give up planting flowers and some had a loss in income from selling vegetable. Apart from their loss, this also contribute to a waste of food.

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So to calculate elasticity, we must focus on the magnitude and the size of the customer's response

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Number of substitutes depends on the definition of the good (more broadly/generally or narrowly/specifically

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A good consumed habitually
-->demand is more price elastic

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The quanity demanded of the product is infinitively responsive to price changes

Produces horizontal line

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Direct r/s between proportion of income spent on a good & price elasticity

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The greater the proportion of income spent on a good, the more price elastic the demand of a good will be

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3.It was reported in the newspapers that, ”In September, farmers in Cameron Highlands complained of a vegetable glut after some of them made a switch from planting flowers to tomatoes.”  Under what demand conditions might this situation cause the farmers to feel unhappy ?  (Hint: consider the price elasticity of demand for tomatoes)

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Luxury good = more price elastic
Necessity = less price elasti

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2. Use the determinants of price elasticity of demand to judge and explain whether the demand for the following products is price elastic or inelastic:

a.       Cigarettes
b.      A particular brand of cigarettes

c.       Butter

d.      Salt

e.       A two-week trip to Switzerland

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a) The demand for cigarettes is price inelastic. Availability of substitutes.Since cigarettes is a broad term, there will be fewer substitutes available thus demand is price inelastic

b) The demand for a particular brand of cigarettes is price elastic. Availability of substitutes .It is a particular brand of cigarettes thus it is specific meaning there will be more substitutes for it therefore the demand is price elastic

c)The demand for butter is price inelastic. Necessity Vs Luxury . Butter is considered a necessity as it is consumed daily thus demand is price inelastic.

d)The demand for salt is price inelastic. Necessity Vs Luxury. Salt is considered a necessity since it can be consumed and use daily thus demand is price inelastic

e)The demand for a two-week trip to Switzerland is price elastic. A two-week trip to Switzerland is considered a luxury as not everyone is able to afford it as it will cost thousands of dollars thus demand is price elastic

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The greater the number of substitutes available to consumers, the more price elastic the demand of a good will be

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Customers are not responsive at all to price change and the demand for the price for the good is perfectly inelastic

Produces a vertical line

usually applies to products like insulin for diabetics

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Less price elastic --> steeper graph
More price elastic  --> more gentle graph

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% change in Q = % change in P

Demand is unit price elastic

Produces a hyperbola curve

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--> whether price increases or decreases

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Price & Quantity Demanded of a good--> Inverse r/s

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Price & Quantity Demanded of a good--> Inverse r/s

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How to tell whether the demand for the good is elastic or inelastic?

OR

How to tell if a consumer is responsive or unresponsive to the change in price of the good

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Ed = % change in quantity demanded                         % change in price

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Ed = % change in quantity demanded                         % change in price

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--> 1 Answer obtained

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(DPED) )Determinants of Price Elasticity of Demand

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(DPED) )Determinants of Price Elasticity of Demand

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% change in Q is less than % change in P
--> consumers are very unresponsive to price change and demand for the good is price inelastic

Produces a gentler graph

-->usually applies to necessities such as newspapers

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% change in Q is more than % change in P
--> consumers are very responsive to the price change and demand for the good is price elastic

--> Produces a steeper graph

--> usually applies to luxuries such as branded watches

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Elasticity is the level of response of consumers to changes in DPED

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- Demand
- Supply