GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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1.larger
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2.smaller
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3.zero
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4.unity
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Detailed explanation-1: -The demand for a good is likely to be elastic if close substitutes are easily available. On the other hand, if close substitutes are not available easily, the demand for a good is likely to be inelastic. Other things equal, if a good has more substitutes, its price elasticity of demand is larger.
Detailed explanation-2: -Elasticity of Demand by Price If the price elasticity of demand is greater than 1, it is deemed elastic. That is, demand for the product is sensitive to an increase in price.
Detailed explanation-3: -If price elasticity is greater than 1, the good is elastic; if less than 1, it is inelastic. If a good’s price elasticity is 0 (no amount of price change produces a change in demand), it is perfectly inelastic.
Detailed explanation-4: -Luxury goods represent normal goods associated with income elasticities of demand greater than one. Consumers will buy proportionately more of a particular luxury good compared to percentage change in their income.
Detailed explanation-5: -Answer and Explanation: Demand is termed elastic when the elasticity is more than 1.