Explain Any Two Factors that Affect the Price Elasticity of Demand. Give Suitable Examples. - Economics


Explain any two factors that affect the price elasticity of demand. Give suitable examples.



Factors affecting the price elasticity of demand are :-

1. Availability of substitutes:-

The price of a good falls in relation to its substitute. Consumers can easily switch from one good to another even if there is only a small change in price and so its demand will increase. Hence the price elasticity of demand for commodities having close substitutes is relatively high.

2. Nature of good:-

A good can be necessary, comfort or luxury good as per the preferences of the consumers. The demand for necessary good does not fluctuate with the price as these goods are basic for day-to-day life. Hence it is inelastic. The demand for comfort and luxury goods are elastic as the consumption of these goods can be postponed.

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2012-2013 (March) Delhi Set 1


How does change in the price of complementary good affect the demand for the given good? Explain with the help of an example.

A 5 percent fall in the price of a good raises its demand from 300 units to 318 units. Calculate its price elasticity of demand.


Explain the effect of the following on the price elasticity of demand of a commodity:

(i) Number of substitutes

(ii) Nature of the commodity 

When price of a commodity falls by Rs 1 per unit, its quantity demanded rises by 3 units. Its price elasticity of demand is (−) 2. Calculate its quantity demanded if the price before the change was Rs 10 per unit. 

Match the following :


Group 'A' Group 'B'
(a) Demand and price (1) wages
(b) Perfectly elastic supply (2) Vertical supply curve
(c) Land (3) Transfer income
(d) Unemployment allowance (4) Horizontal supply curve
(e) Reserve Bank of India (5) Inverse relation
  (6) Rent
  (7) 1935
  (8) Direct relation

State whether the following statement is  true or false :

Concept of ‘elasticity of demand’ is useful for the finance minister.

Write Short note on the following.
Ratio method of measuring price elasticity of demand ?

Define or explain the following concepts (Any THREE): 


State with reason whether you agree or disagree with the following statements. (any Three) 
Vrious factors influence Elasticity of Demand.

Choose the correct answer :                

 Perfectly elastic demand curve is _________. 

Choose the correct answer :                  

Demand of labour is _______ 

 Choose the correct answer :  

 Demand of electricity for domestic purpose is _________. 

State whether the following statements are TRUE or FALSE : 

 The demand of foodgrains is inelastic.  

Choose the correct answer :     

The account in which the specific amount is deposited per month regularly is known as _________.  

Match the following:

Group A
Group B
1. Cars and petrol
a. Elastic demand
2. Point method
b. Complementary
3. Necessary goods
c. Geometric method
d. Inelastic demand

The coefficient of price elasticity of demand for Good X is (−) 0.2. If there is a 5% increase in the price of the good, by what percentage  will the quantity demanded for the good fall?


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