ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It consumes a low % of income
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It has many substitutes
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It is not addictive
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It is a luxury
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Detailed explanation-1: -Inelastic products are usually necessities without acceptable substitutes. The most common goods with inelastic demand are utilities, prescription drugs, and tobacco products. Businesses offering such products maintain greater flexibility with prices because demand remains constant even if prices increase or decrease.
Detailed explanation-2: -’Salt’ have perfectly inelastic demand.
Detailed explanation-3: -Price inelasticity usually occurs with products that have fewer close substitutes, which means fewer options for customers. Such goods tend to be necessities that people can’t do without and therefore their needs stay the same.
Detailed explanation-4: -Substitutes. If a substitute product is easy to find when a product’s price rises, the demand will be more elastic. Necessities vs. luxuries. Consumer’s income or budget. Short-vs. Period following a change in price. Competition vs. Infrequent items. Habitual consumption. More items •04-Feb-2020