Is the demand for breakfast cereal likely to be price elastic or price inelastic and why?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The demand for any specific breakfast cereal (such as Cheerios) will generally be more elastic than the demand for cereals in general.  The demand for cereals in general will be relatively inelastic compared to many other goods.

The demand for a specific kind of cereal will be more price elastic because it has more substitutes.  Goods generally have inelastic demand if there are few substitutes for them.  In the case of Cheerios, there are many substitutes.  There are generic cereals that imitate Cheerios.  There are other kinds of cereal that people could eat instead.  There are, of course, substitutes for cereal in general, but there are fewer of these than for Cheerios.  Therefore, demand for these will be more elastic than demand for cereal in general.

The demand for cereal as a whole will be relatively inelastic.  The reason for this is that cereals are relatively inexpensive.  Demand for goods that do not take up a large proportion of a consumer’s budget is generally more inelastic than demand for goods that are more expensive.  Cereal is, relatively speaking, not all that expensive.  Therefore, it is likely to have fairly inelastic demand.

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