The demand for milk as a category is not sensitive

Economics Jan 19, 2021

The demand for milk as a category is not sensitive. Which of the following could be among the reasons why the demand is so inelastic?

a. The amount of milk dairies produce cannot change quickly in response to price movements.

b. None of the substitutes for milk are very close substitutes.

c. It is a narrow category within the larger category of dairy products.

d. Milk is a large portion of any consumer's total spending.

Expert Solution

Answer: B

Milk is not a large portion of most people's budget. It gets its inelastic demand because it is broad enough to cover a good that has no close substitutes. Milk is needed in the production of many other food stuffs. Milk is also a basic necessity for most Western families. Consumers thus can't simply switch consumption to another good.

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