--%>
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 : Illustrates the term shot run

    Illustrates the term shot run production function?

    		•
  • Q : Cost concept of business operation and

    Categories the cost concept of business operation and decision making?

    		•
  • Q : Labor Force Participation In the United

    In the United States throughout the past 70 years or therefore, the: (1) amount of human capital per worker has fallen. (2) labor force participation rate of women has risen. (3) supply of labor has consistently grown faster than the demand. (4) real rates of return f

    		•
  • Q : Explain why firms may close in Short Run

    Val Alvarado, an accountant, quit his $80,000 year job and bought an existing laundry through its earlier owner, he was Ricky White. The lease has five years stayed and needs a monthly payment of $4,000. Val's explicit cost amounts to $3,000 per month more than his

  • Q : Hiring more labor in profit maximization

    When a firm hires an additional worker who adds $100 worth of output daily, and adds $50 daily to the firm’s costs, in that case the firm must: (w) hire more labor. (x) hire less labor. (y) not change its employment of labor. (z) sell off some o

    		•
  • Q : Illustrates the important areas of

    Illustrates the important areas of managerial economics as a tool for decision making?

    		•
  • Q : Legal incidence of tax burdens The firm

    The firm or individual responsible for paying a specified tax to the government bears: (w) stigma of being a tax evader when it is completely forward shifted. (x) full tax burden only when the tax is backward shifted. (y) legal incidence of the tax. (z) reduction in p

    		•
  • Q : Requirements for Food production I have

    I have a problem in economics on Diminishing Returns. Please help me in the following question. In a completely employed food-and-clothing economy, equivalent successive raises in food production will ultimately need successively: (i) Larger increases

    		•
  • Q : What is social cost of production What

    What is social cost of production?

    		•
  • Q : Labor demand increases and supply

    Wages tend to increase while labor demand: (w) and supply both decrease. (x) decreases and supply increases. (y) and supply both raise. (z) increases and supply decreases. Please choose the right answer from above.

    		•