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Questions
The nature of a commodity determines its price elasticity of demand. Explain.
How does the nature of a good affect its elasticity of demand?
Solution
Elasticity of demand of a good is influenced by its nature in the following ways:
- When a commodity is a necessity, its demand is generally inelastic (Ed < 1) → food grains, salt, school uniform etc.
- When a commodity is a comfort, its demand is generally unit elastic (Ed = 1) → cooler, TV, mobile phone etc.
- When a commodity is a luxury, its demand is generally elastic (Ed > 1) → car, home theatre, air conditioner etc.
RELATED QUESTIONS
Explain any two factors that affect the price elasticity of demand. Give suitable examples.
Explain the effect of the following on the price elasticity of demand of a commodity:
(i) Number of substitutes
(ii) Nature of the commodity
Match the following :
| Group 'A' | Group 'B' |
| (a) Demand and price | (1) wages |
| (b) Perfectly elastic supply | (2) Vertical supply curve |
| (c) Land | (3) Transfer income |
| (d) Unemployment allowance | (4) Horizontal supply curve |
| (e) Reserve Bank of India | (5) Inverse relation |
| (6) Rent | |
| (7) 1935 | |
| (8) Direct relation |
Choose the correct answer :
Perfectly elastic demand curve is _________.
State whether the following statements are TRUE or FALSE :
The demand of foodgrains is inelastic.
Choose the correct answer :
The account in which the specific amount is deposited per month regularly is known as _________.
The coefficient of price elasticity of demand for Good X is (−) 0.2. If there is a 5% increase in the price of the good, by what percentage will the quantity demanded for the good fall?
The government wants to reduce the consumption of good by 10%. The price elasticity of demand for elasticity is -0.4. The government should raise the price of elasticity by ______.
Explain briefly the factors on which elasticity of demand depends.
How does the nature of a good affect its elasticity of demand?
