ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Their price is expensive.
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They can’t be easily replaced.
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They can be easily replaced.
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None of the above
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Detailed explanation-1: -Demand for a new car is most likely be elastic as the purchase of new car is dependent on several factors and it can be delayed. The demand for a particular model of car is in turn highly elastic because of the presence of many substitutes.
Detailed explanation-2: -Elasticities are often lower in the short run than in the long run. Changes that just aren’t possible to make in a short amount of time are realistic over a longer time frame. On the demand side, that can mean consumers eventually make lifestyle choices-like buying a more fuel efficient car to reduce their gas usage.
Detailed explanation-3: -Elasticity of demand in short run In the short run demand is likely to be more inelastic (low = less than 1). If people are used to buying a good, then when the price goes up, they will tend to keep buying it out of habit.
Detailed explanation-4: -Supply is normally more elastic in the long run than in the short run for produced goods, since it is generally assumed that in the long run all factors of production can be utilized to increase supply, whereas in the short run only labor can be increased, and even then, Page 2 changes may be prohibitively costly.