ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A product with an elasticity of 0 would be considered perfectly inelastic, because price changes have no impact on demand. Many household items or bare necessities have very low price elasticity of demand, because people need these items regardless of price. Gasoline is an excellent example.

Detailed explanation-2: -If price elasticity is greater than 1, the good is elastic; if less than 1, it is inelastic. If a good’s price elasticity is 0 (no amount of price change produces a change in demand), it is perfectly inelastic.

Detailed explanation-3: -Necessary goods and commodities (inelastic) Goods that are essential to life are usually inelastic, meaning that a change in price has little effect on demand. For example, if the price of gasoline goes up, demand doesn’t change too much because people still need to use their cars to get to work.

Detailed explanation-4: -a) If demand is price inelastic, then increasing price will decrease revenue.

Detailed explanation-5: -The main factors that determine demand are price, price of substitutes, income, taste, and expectations of future price changes. Other minor factors do come into play, such as brand loyalty. Price inelasticity usually occurs with products that have fewer close substitutes, which means fewer options for customers.