ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The demand for a good is likely to be elastic if close substitutes are easily available. On the other hand, if close substitutes are not available easily, the demand for a good is likely to be inelastic. Other things equal, if a good has more substitutes, its price elasticity of demand is larger.

Detailed explanation-2: -The price elasticity of demand for a good or service will be greater in absolute value if many close substitutes are available for it. If there are lots of substitutes for a particular good or service, then it is easy for consumers to switch to those substitutes when there is a price increase for that good or service.

Detailed explanation-3: -Substitutes: Price elasticity of demand is fundamentally about substitutes. If it’s easy to find a substitute product when the price of a product increases, the demand will be more elastic. If there are few or no alternatives, demand will be less elastic.

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: -Goods with many alternatives or competitors are elastic because, as the price of the good rises, consumers shift purchases to substitute items. Incomes and elasticity are related-as consumer incomes increase, demand for products increases as well.