ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Perfectly elastic
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Relatively elastic
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Relatively inelastic
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Perfectly inelastic
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Detailed explanation-1: -Electricity is a good with few or no close substitutes. What would you expect about the price elasticity of demand for electricity? A change in the price causes a large change in quantity demanded.
Detailed explanation-2: -Electricity demand in all sectors is highly price and income inelastic in the short run.
Detailed explanation-3: -Answer and Explanation: The price elasticity of demand for electricity is lower in the short-run and larger in the long run.
Detailed explanation-4: -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.