ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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People don’t change their shopping behavior over time.
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Few substitutes become available.
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People buy more products over time.
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People have time to find substitutes and change behaviors.
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Detailed explanation-1: -Short run versus long run: Price elasticity of demand is usually lower in the short run, before consumers have much time to react, than in the long run, when they have greater opportunity to find substitute goods. Thus, demand is more price elastic in the long run than in the short run.
Detailed explanation-2: -Demand sometimes becomes more elastic over time because people can eventually find substitutes that allow large adjustments to what they buy. Elasticity helps us measure how consumers respond to price changes. Elasticity of demand determines how a change in prices will affect a firm’s total revenue or income.
Detailed explanation-3: -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.