The demand for salt is …………

Step 1: Analyze the question The question asks about the price elasticity of demand for salt, which measures how much the quantity demanded changes when the price changes.

Step 2: Explain the concept

• Elastic demand (PED > 1): Quantity demanded changes by a larger percentage than the price. This is typical of luxuries and goods with many substitutes.
• Inelastic demand (PED < 1): Quantity demanded changes by a smaller percentage than the price. This is typical of necessities, cheap goods, and goods with few or no close substitutes.
• Unitary elastic (PED = 1): Quantity demanded changes by exactly the same percentage as the price.

Step 3: Apply to salt Salt has these features:

1. It is a necessity. Every household needs it for cooking and food preservation.
2. It has no close substitutes. Nothing else gives the same taste.
3. It is very cheap. It takes up a tiny part of a person's income, so a price rise or fall hardly changes how much people buy.
4. Consumption is fairly fixed. People will not eat much more salt because it is cheaper, and they will not cut back much when it is dearer.

So a change in the price of salt causes only a small change in the quantity demanded. This means demand for salt is price inelastic.

Step 4: Eliminate the wrong options

• A. Elastic: wrong, because salt is a necessity with no close substitutes.
• C. Unitary elastic: wrong, because the response is much weaker than proportional.
• D. Both a and b: wrong, because a good cannot be elastic and inelastic at once.

Answer: B. Inelastic

Exam tip: Remember the "NCS" rule for inelastic goods: Necessities, Cheap items, and goods with Substitutes that are few or none. Examples that come up often are salt, matches, and kerosene. Luxuries such as jewellery and goods with many substitutes such as brands of soft drinks tend to be elastic.