GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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1.necessity
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2.luxuary
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3.Has little importance in total budget
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4.none of the above
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Detailed explanation-1: -Answer: The commodity is a necessity if the elasticity of demand is low. Explanation: When the elasticity of demand is very low, the commodity is a necessity since that commodity has a little importance to the total budget.
Detailed explanation-2: -A demand curve for a product with low elasticity appears to be steeper, because the quantity demanded doesn’t change much, even if prices do. Products with low price elasticity are described as being inelastic.
Detailed explanation-3: -If the value is less than 1, demand is inelastic. In other words, quantity changes slower than price. If the number is equal to 1, elasticity of demand is unitary. In other words, quantity changes at the same rate as price.
Detailed explanation-4: -When the price elasticity of demand is unit (or unitary) elastic (Ed = −1), the percentage change in quantity demanded is equal to that in price, so a change in price will not affect total revenue.
Detailed explanation-5: -Low elasticity of demand indicates that consumers tend to buy a product regardless of changes to price or external factors. Gasoline is a classic example of a low-elasticity product.