ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The number of subtitutes and how dependant you are on the good.
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The number of customers and producers of the good.
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How dependant you are and the quality of the good.
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None of the above
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Detailed explanation-1: -The four factors that affect price elasticity of demand are (1) availability of substitutes, (2) if the good is a luxury or a necessity, (3) the proportion of income spent on the good, and (4) how much time has elapsed since the time the price changed. If income elasticity is positive, the good is normal.
Detailed explanation-2: -The availability of alternatives or substitute goods can affect demand elasticity. 1 Hence, the demand for goods or services with many substitutes is highly price elastic; a small increase in the price levels of goods causes consumers to buy its substitutes.
Detailed explanation-3: -Close substitutes for a product affect the elasticity of demand. If another product can easily be substituted for your product, consumers will quickly switch to the other product if the price of your product rises or the price of the other product declines.
Detailed explanation-4: -The price elasticity of demand for a good or service will be greater in absolute value if many close substitutes are available for it. If there are lots of substitutes for a particular good or service, then it is easy for consumers to switch to those substitutes when there is a price increase for that good or service.
Detailed explanation-5: -As temperature increases, elasticity decreases. The elasticity of metal might change depending on the impurity added. If the impurity has greater elasticity, the elasticity of the material is increased. If the impurity is less elastic, the elasticity is reduced.