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Question
How is the price elasticity of demand of a commodity is affected by the number of its substitutes.
Solution
Price elasticity of demand of goods depends on the availability of its substitutes in the market. More the number of substitutes available, higher the price elasticity of demand for that good. It is because when there is a price change the buyers can easily shift from one substitute to another.
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Reasoning (R) : Changes in consumers income leads to a change in the quantity demanded.
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Reasoning (R): Changes in consumers income leads to a change in the quantity demanded.
Read the extract given below and answer the questions.
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Reasoning (R): Changes in consumers income leads to a change in the quantity demanded.
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Price elasticity of demand shows:
