Bangladesh Trade

Butter:

In Bangladesh butter is used more occasionally as cheaper substitute such as edible oil is more used in the country. As a result, the consumers are price sensitive to this commodity, the more the price rises the less butter is bought for consuming. Such scenario can also be seen in the case of butter’s elasticity. As we can see butter is already very elastic in both short term (1.28) and long term (2.84).

In short run the elasticity of butter is 1.28 which is >1. Which means the commodity itself is price sensitive. Which means that1 percent change in price will result in 1.28 percent change in quantity demanded. In the long run we can see that the elasticity has increased from 1.28 to 2.84. It means for 1 percent change in price will result in 2.84 percent change in quantity demanded.

The reason behind the increase in price elasticity of demand is, in the short run when price is increased the quantity demanded in the market will not change as there will be less substitute products in the market. But in the long run consumers will not likely to spend much in butter if the price increases and there will be more cheaper substitutes in the market (i.e.: Edible oil) which will result in the consumers getting more price sensitive and increasing the elasticity.

Petrol

In Bangladesh petrol is the main source of fuel. As a result, the consumers are less price sensitive to this commodity, the more the price rises the consumers cannot decrease consuming that much. Such scenario can also be seen in the case of petrol’s elasticity. As we can see petrol is already inelastic in both short term (0.40) and long term (0.92).

In short run the elasticity of petrol is 0.40 which is <1. Which means the commodity itself is not price sensitive. Which means 1 percent change in price will result in 0.40 percent change in quantity demanded. In the long run we can see that the elasticity has increased from 0.40 to 0.92. It means for 1 percent change in price will result in 0.92 percent change in quantity demanded.

The reason behind the increase in price elasticity of demand is, in the short run when price is increased the quantity demanded in the market will not change as there will be less substitute products in the market and the response time for consumers regarding price change is high for petrol. But in the long run consumers will not likely to spend much in petrol if the price increases over time people may increasingly start to use alternative energy sources such as natural gas, hydrogen or solar panels.

Tea

In Bangladesh is a kind of addictive drink. As a result, the consumers are less price sensitive to this commodity, the more the price rises the consumers cannot decrease consuming that much immediately. Such scenario can also be seen in the case of tea’s elasticity.