Unit 1: Fizzy Drinks, Fruit and Vegetables.. Price Elastic or Inelastic?

Interesting blog post from tutor2u - soft drinks are elastic, whilst fruit and vegetables are inelastic:

A 10% rise in soft drink prices could decrease consumption by up to 24% - giving a coefficient of (-)2.4, definitely in the "elastic" range.

On the other hand, if fruit and vegetables were subsidised by 10%, consumption would only increase by 8%, giving a coefficient of (-)0.8, which is inelastic.

What are the reasons for the differences in elasticity:

• Are consumers more sensitive to a price increase than a price decrease?
• Are these results due to the fact that lower income consumers are the ones most likely to be purchasing soft drinks and higher income consumers most likely to be purchasing fruit and vegetables?
• If spending on fruit and vegetables is inelastic, then total spending will fall. Will consumers spend this "extra" income on junk food?
• What other measures could / should be used to encourage consumption of healthy foods and discourage consumption of fatty foods.

Read this article HERE for more information.

Full post is HERE