Question

Read the following news report and answer the Q.97-Q.100 on the basis of the same:

The quantity of a commodity that a consumer is willing to buy and is able to afford, given the prices of goods and the consumer's tastes and preferences is called demand for the commodity. Whenever one or more of these variables change, the quantity of the good Chosen by the consumer is likely to change as well. The relation between the consumer's optimal choice of the quantity of a good and its price is very important and this relation is called the demand function. Thus, the consumer's demand function for a good gives the amount of the good that the consumer chooses at different levels of its price when the other things remain.

The price elasticity of demand for a good depends on ______ and ______ of the good.

पर्याय

• The nature of the good

• The availability of close substitutes

• Both (1) and (2)

• None of the above

Answer 1

Both (1) and (2)

Explanation:

The nature of a good and the availability of close substitutes determine the price elasticity of demand for it. Take, for instance, basic needs such as food. These commodities are necessary for survival, and demand for them does not fluctuate much in reaction to price fluctuations.