Final answer:
The price elasticity of demand for salt is likely to be higher for lower-income individuals than for wealthier individuals because people with lower incomes are more sensitive to price changes. The elasticity of demand may differ in rich versus poor countries and is less likely influenced by medical needs that necessitate consistent salt intake.
Step-by-step explanation:
The price elasticity of demand for salt would be different among different groups of people, based on their income, country's economic status, and personal medical conditions. The elasticity of demand is the measure of how much the quantity demanded of a good responds to a change in the price of that good. It is represented by a numerical value which, when higher than one, indicates a product is elastic and its demand is significantly affected by price changes.
Income affects price elasticity because generally, lower-income individuals are more sensitive to price changes than wealthier individuals, therefore it is likely that low-income shoppers will have a higher price elasticity of demand for salt. Similarly, the demand for salt in rich countries versus poor countries might reflect different elasticities because poor countries are likely more sensitive to changes in prices of basic goods like salt. However, the demand for salt may not greatly fluctuate based on price for people with pre-existing medical conditions that require strict salt consumption, leading to an inelastic demand.
When advised on pricing strategies, elasticity is crucial. For a good with an elasticity of demand of 1.4, a price reduction would typically increase total revenue, as the proportionate increase in quantity demanded would outweigh the proportionate fall in price. Conversely, if elasticity were 0.6, it would suggest that demand is inelastic, and a price increase might be a better strategy to maximize revenue because the proportionate reduction in quantity demanded would be less than the proportionate increase in price. When the elasticity is 1, the product is unit elastic, and changes in price will not affect total revenue.