16.0 Annex B: Demand elasticities of food products
Research conducted for Defra on the elasticities of different food products suggests that takeaway food is generally inelastic – that is, demand is relatively unresponsive to price. This can be seen below, where the compensated elasticities for the available takeaway products clearly show inelastic demand. Compensated elasticities mean that the figures do not consider the income effect: the possibility that a lower price leaves consumers with more income at each quantity of consumption that they may then spend on the product. The authors note that at this high level of product disaggregation, the compensated elasticities are more informative because the substitution effect (switching consumption to/away from the product whose price changes) is stronger as households tend to be more sensitive to changes in the prices of individual products than they would be to changes in the prices of broad product categories.
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