ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A necessity
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A luxury
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Has little importance in total budget
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(a) and (c) above
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Detailed explanation-1: -If elasticity of demand is very low, it shows that the commodity is necessity and has little importance in total budget.
Detailed explanation-2: -A demand curve for a product with low elasticity appears to be steeper, because the quantity demanded doesn’t change much, even if prices do. Products with low price elasticity are described as being inelastic.
Detailed explanation-3: -What does low price elasticity of demand for a commodity show? Notes: Price Elasticity is the measure of the degree of responsiveness of demand for a commodity to change in its price. That means the low price elasticity is demand doesn’t change with the price. These are the necessary goods.
Detailed explanation-4: -The lower the price elasticity of demand, the less responsive the quantity demanded is given a change in price. When the price elasticity of demand is less than one, the good is considered to show inelastic demand.
Detailed explanation-5: -If the commodity has many close substitutes the demand for such a commodity will be highly elastic. The reason is that where exists a close substitute in the relevant price range, its demand will tend to be elastic. But in respect of a commodity having no substitute, the demand will be somewhat inelastic.