ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If the income elasticity of demand is greater than 1, the good or service is considered a luxury and income elastic. A good or service that has an income elasticity of demand between zero and 1 is considered a normal good and income inelastic.

Detailed explanation-2: -If elasticity is greater than 1, the curve is elastic. If it is less than 1, it is inelastic. If it equals one, it is unit elastic.

Detailed explanation-3: -For example, if a person experiences a 20% increase in income, the quantity demanded for a good increased by 20%, then the income elasticity of demand would be 20%/20% = 1. This would make it a normal good.

Detailed explanation-4: -If demand for a good or service is relatively static even when the price changes, demand is said to be inelastic, and its coefficient of elasticity is less than 1.0. Examples of elastic goods include clothing or electronics, while inelastic goods are items like food and prescription drugs.

Detailed explanation-5: -The PED of a product is determined by the responsiveness of quantity demanded in relation to changes in price, and can be described as: Elastic (when elasticity of demand is less than-1; for example, -2 or even just-1.1 ): In this case, an increase in price by 1% leads to more than 1% drop in volume.