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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
How does change in the price of complementary good affect the demand for the given good? Explain with the help of an example.
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.
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 electricity for domestic purpose is _________.
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?
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.
Explain briefly the factors on which elasticity of demand depends.
State 3 factors which affect price elasticity of demand.
How does the time period affect the elasticity of demand?
