Is there a good substitute for aluminum foil, can the typical household cut the amount of foil they need, or can reyn raise the price of foil to say $6.00 – is the demand for foil elastic or inelastic?

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Elasticity – how sensitive is demand for household products to changes in prices? Reynolds (REYN) makes aluminum foil – a household commodity product that we all use on a daily basis. GS is estimating that prices for aluminum foil are going to go up significantly (exhibit 16) and that demand will fall and costs will rise hurting earnings at REYN – hence the sell recommendation. Will the typical household buy less aluminum foil when the price goes from $3.69 to an estimated $4.64? Is there a good substitute for aluminum foil, can the typical household cut the amount of foil they need, or can REYN raise the price of foil to say $6.00 – is the demand for foil elastic or inelastic? If REYN raises the price of foil by 10%, will demand drop by more or less than 10% – tell me what you think and why.

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