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Assuming ceteris paribus conditions, rank the following products in order from the most price elastic to the least price elastic. Explain why.

  • Ice Cream

  • Peter’s Chocolate Ice Cream

  • Chocolate Ice Cream

  • Frozen Desserts

  • Desserts

For some reason I find this question very subjective.

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    $\begingroup$ Can you comment on what you have done? Question showing no effort are off-topic here. $\endgroup$ – luchonacho Apr 25 '17 at 9:02
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The question is not subjective if you accept the assumption that similar products are likely to be substitutes, i.e. if you wanted chocolate ice cream but none was available you are more likely to get vanilla ice cream than pork chops.

The trick is that the groups can be ordered from smaller to larger, e.g. all ice creams are frozen desserts but not all frozen desserts are ice creams. If the price of a whole product group increases it is more difficult to find a cheap substitute than if only one product's price had increased. In this case all other products in the product group would be available as substitutes at their original prices.

Using this assumption you should be able to finish the assignment.

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It's difficult to answer. Although I think denesp has the right idea, but I think it's also possible for a specific item to be less elastic than its category group in some circumstances.

If a category contains three goods: X, Y, Z. If X and Y are very elastic while Z is relatively inelastic then it's possible for the category to be far more elastic than Z. For instance, although salt could be considered a spice, it's probably far more inelastic than pepper or sugar.

Furthermore, it's also possible that goods within the same category are complements.

Although I think for this particular question, denesp's answer is good enough.

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