ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -High-priced products often are highly elastic because, if prices fall, consumers are likely to buy at a lower price. Goods with many alternatives or competitors are elastic because, as the price of the good rises, consumers shift purchases to substitute items.

Detailed explanation-2: -An elastic good is defined as one where a change in price leads to a significant shift in demand and where substitutes are available for an item, the more elastic the good will be. The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

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 cross elasticity of demand for substitute goods is always positive because the demand for one good increases when the price for the substitute good increases. Alternatively, the cross elasticity of demand for complementary goods is negative.

Detailed explanation-5: -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.