ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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price of Good A
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price of Good B
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supply of good A
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income of consumers of Good A
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Detailed explanation-1: -The price elasticity of demand (PED) for a good is a measure of the degree of responsiveness of the quantity demanded to a change in the price, ceteris paribus. The PED for a good is calculated by dividing the percentage change in the quantity demanded by the percentage change in the price.
Detailed explanation-2: -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-3: -The degree to which the quantity demanded changes with respect to price is called the elasticity of demand.
Detailed explanation-4: -Income Elasticity: Degree of responsiveness of a change in quantity demanded to a change in the income of the consumer.
Detailed explanation-5: -∴ Cross elasticity of demand is the degree of responsiveness of the demand for a commodity to a change in its price.