Advertisements
Advertisements
Questions
The nature of a commodity determines its price elasticity of demand. Explain.
How does the nature of a good affect its elasticity of demand?
Advertisements
Solution
Elasticity of demand of a good is influenced by its nature in the following ways:
- When a commodity is a necessity, its demand is generally inelastic (Ed < 1) → food grains, salt, school uniform etc.
- When a commodity is a comfort, its demand is generally unit elastic (Ed = 1) → cooler, TV, mobile phone etc.
- When a commodity is a luxury, its demand is generally elastic (Ed > 1) → car, home theatre, air conditioner etc.
RELATED QUESTIONS
How does change in the price of complementary good affect the demand for the given good? Explain with the help of an example.
State whether the following statement is true or false :
Concept of ‘elasticity of demand’ is useful for the finance minister.
Define or explain the following concepts (Any THREE):
Stock
Choose the correct answer :
Demand of labour is _______
What is the implication of a vertical demand curve?
Assertion (A): The demand for soap, salt, matches etc. is highly elastic.
Reason (R): The demand for soap, salt, matches etc. is highly inelastic because the consumer spends a very small amount of expenditure in relation to his/her income.
State 3 factors which affect price elasticity of demand.
Discuss any three/ four factors determining price elasticity of demand.
What type of demand characterizes necessity goods compared to luxury goods?
