Question

How is the elasticity of demand of a commodity affected by the Nature of a commodity?

Answer 1

The nature of the commodity, that is, whether it is a “necessity,” “luxury,” or “comfort” commodity, is one of the key factors that determines price elasticity of demand. Food items and other essentials typically have inelastic demand. These products are necessary for life. These necessities of existence will be bought in roughly set amounts, regardless of how much they cost. The demand for needs may be slightly impacted by changes in their prices. For such commodities, the price elasticity of demand is low. However, materials for “luxuries” and “comfort” are not necessary for survival, and their use can be delayed or avoided. As a result, a slight change in their price causes a significant shift in their demand. For instance, the demand for expensive furniture, color TV sets, and air conditioners may rise significantly if their prices decline. In general, the demand for comforts and luxuries is elastic, but the need for requirements is inelastic.