ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The availability of alternatives or substitute goods can affect demand elasticity. 1 Hence, the demand for goods or services with many substitutes is highly price elastic; a small increase in the price levels of goods causes consumers to buy its substitutes.

Detailed explanation-2: -It means that a small rise in the price of the good would cause a greater fall in its quantity demanded as the buyers would switch to its substitutes. Hence, the demand for a product is more price elastic if more substitutes are available in the market.

Detailed explanation-3: -Close substitutes for a product affect the elasticity of demand. If another product can easily be substituted for your product, consumers will quickly switch to the other product if the price of your product rises or the price of the other product declines.

Detailed explanation-4: -An elastic good is defined as one where a change in price leads to a significant shift in demand and where substitutes are available for an item, the more elastic the good will be.

Detailed explanation-5: -The cross elasticity of demand for substitute goods is always positive because the demand for one good increases when the price for the substitute good increases. Alternatively, the cross elasticity of demand for complementary goods is negative.