ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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change in price of the good.
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change in price of a different good.
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change in consumer income.
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change in supply of the good.
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Detailed explanation-1: -Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is computed as the percentage change in quantity demanded-or supplied-divided by the percentage change in price.
Detailed explanation-2: -Income elasticity of demand is an economic measure of how responsive the quantity demanded for a good or service is to a change in income. The formula for calculating income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in income.
Detailed explanation-3: -∴ Cross elasticity of demand is the degree of responsiveness of the demand for a commodity to a change in its price.
Detailed explanation-4: -A measure of the responsiveness of quantity demanded to changes in the price of a related good is known as cross elasticity of demand. Cross elasticity of demand is calculated by dividing the proportionate change of quantity demanded of one commodity by the proportionate change of price of another commodity.
Detailed explanation-5: -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.