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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?
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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
Explain any two factors that affect the price elasticity of demand. Give suitable examples.
How does change in the price of complementary good affect the demand for the given good? Explain with the help of an example.
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 statements are TRUE or FALSE :
The demand of foodgrains is inelastic.
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?
When the price elasticity of demand for a good equals ______.
Explain briefly the factors on which elasticity of demand depends.
Comment upon the shape of the demand curve, if Ed = 0.
Discuss any three/ four factors determining price elasticity of demand.
What effect do habitual consumption patterns have on price elasticity of demand?
