ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Variety of uses for that good
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Its low price
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Close substitutes for that good
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High proportion of the consumer’s income spent on it
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Detailed explanation-1: -The price elasticity of demand tends to be low when spending on a good is a small proportion of their available income.
Detailed explanation-2: -∴ The factor which generally keeps the price-elasticity of demand for a good low is its low price.
Detailed explanation-3: -Goods that are considered essential have a low elasticity of demand. Electricity, gas, oil, and water are all relatively inelastic because consumers rely on these as necessities rather than luxuries. Also, keep in mind that the price elasticity of demand is very time-sensitive.
Detailed explanation-4: -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. Products with high price elasticity are generally non-staple goods.
Detailed explanation-5: -An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small. If the formula creates an absolute value greater than 1, the demand is elastic.