--%>
Assignment Help - homework help

States the determinants of elasticity

States the determinants of elasticity?

E

Expert

Verified

Elasticity of demand changes from product to product, market to market and time to time. It is due to affect of various factors as given below:

1. Nature of commodity: Demand for essential goods (as salt and rice and many more) are inelastic. Demands for comfort and luxury goods are elastic.

2. Availability/range of substitutes: A commodity against that lot of substitutes are available, the demand for which is elastic. However, the goods that have no substitutes, demand is inelastic.

3. Extent /variety of uses: Commodities consisting of a variety of uses have a comparatively elastic demand. For example: Demand for steel and electricity.

4. Postponement/urgency of demand: When the consumption of a commodity can be post pond, then it will have elastic demand. Urgent commodity has inelastic demand.

5. Income level: income level also affects the elasticity. For example: Rich man will not curtail the consumption quantity of milk and fruit, even though their price rises, but a poor man will not follow this.

6. Amount of money spends upon the commodity: here an individual spends simply a small portion of his income on the commodity and the price change doesn’t materially influence the demand for the commodity, as well as the demand is inelastic. As Match box, salt and so forth.

7. Durability of commodity: When the commodity is durable or repairable at a substantially less amount (For example: Shoes), the demand for which is elastic.

8. Purchase frequency of a product/time: When the frequency of purchase of a product is very high then the demand is probably to be more price elastic.

9. Range of Prices: When the products at very high price or at very low price consisting of inelastic demand because a slight change in price will not influence the quantity demand.

10. Others: Demand for complimentary goods, the habit of consumers and distribution of income as well as wealth in the society and so forth, are other significant factors affecting elasticity.

   Related Questions in Managerial Economics

  • Q : Surpluses quantity for Supply and Demand

    When an exceptionally warm winter caused the quantity of cashmere sweaters supplied to exceed the quantity demanded at the present market price, in that case: (1) cashmere sweaters will be more heavily demanded subsequent year than this year. (2) an overload of cashme

    		•
  • Q : Total Labor Income by Elasticity of

    When the demand for labor is wage elastic, raises in wage rates cause total labor income to: (w) increase. (x) decrease. (y) remain the same. (z) fluctuate erratically. I need a go

    		•
  • Q : Illustrates the economies of scale are

    Illustrates the economies of scale are categorization?

    		•
  • Q : Marginal revenue productivity When the

    When the marginal revenue product of the last worker hired is superior to the marginal resource cost of the worker, in that case the firm: (w) is experiencing increasing returns to scale. (x) can increase its profits by hiring more la

    		•
  • Q : Analysis of Costs and Revenue with

    Refer to below figure. Assume that the firm is currently producing Q2units. What occurs if this expands output to Q3units: w) Its profit raises by the size of the vertical distance df. x) this makes less profit. y) this incurs a loss. z) this wil

    		•
  • Q : Income effect of a wage increasing When

    When the income effect of a wage increase is more powerful in that case the substitution effect, the: (1) labor supply curve will be “backward bending.” (2) unemployment rate will rise since more people will be available for work. (3) valu

    		•
  • Q : LEAST probable backward bending supply

    The supply curve of labor is LEAST probable to be “backward bending” for: (1) an individual worker. (2) the economy as a whole. (3) highly specialized industries which are main employers of dedicated PhDs hired only after

    		•
  • Q : Function of Profit Maximization in

    For a purely competitive firm operating within a competitive labor market as: (1) the marginal resource cost of labor exceeds the wage rate. (2) the supply of labor is perfectly inelastic. (3) total labor costs are independent of the

    		•
  • Q : Supply of Labor to Competitive Firms

    For a firm hiring through a purely competitive labor market, in that case the supply of labor is: (w) greater than the MRC. (x) less than the MRC. (y) the same as the MRC. (z) vertical to parallel the wage rate.

    Q : Occurrence of production Production

    Production broadly happens while: (1) a corporation creates a profit. (2) weather disperses economic bads within the environment. (3) knowledge is used to direct energy to change materials and raise their value. (4) resources are combined within a bal

    		•