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Factors affecting Price Elasticity of Demand Video Lecture | Indian Economy for State PSC Exams - BPSC (Bihar)
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FAQs on Factors affecting Price Elasticity of Demand Video Lecture - Indian Economy for State PSC Exams - BPSC (Bihar)
| 1. What is price elasticity of demand? |  |
Ans. Price elasticity of demand is a measure of the responsiveness of quantity demanded to a change in price. It indicates how sensitive consumers are to price changes and is calculated as the percentage change in quantity demanded divided by the percentage change in price.
| 2. What are the factors that affect price elasticity of demand? | |
Ans. Several factors influence the price elasticity of demand. These include the availability of substitutes, the necessity of the product, the proportion of income spent on the product, the time period considered, and the habit-forming nature of the product. For example, goods with close substitutes tend to have more elastic demand as consumers can easily switch to alternatives when prices change.
| 3. How does the availability of substitutes impact price elasticity of demand? | |
Ans. The availability of substitutes is a key determinant of price elasticity of demand. When there are many substitutes available for a product, consumers have more options to choose from. This makes the demand for the product more elastic, as consumers can easily switch to alternative products if the price of the original product increases. On the other hand, when substitutes are limited, the demand becomes less elastic.
| 4. What role does the proportion of income spent on a product play in price elasticity of demand? | |
Ans. The proportion of income spent on a product influences its price elasticity of demand. When a product represents a significant portion of a consumer's income, the demand tends to be more elastic. This means that even a small change in price can have a significant impact on the quantity demanded. Conversely, when a product represents a small proportion of income, the demand is less elastic as consumers are less sensitive to price changes.
| 5. How does the time period considered affect price elasticity of demand? | |
Ans. The time period considered can have an impact on the price elasticity of demand. In the short run, consumers may have limited options to adjust their consumption patterns in response to price changes. Therefore, the demand tends to be inelastic. However, in the long run, consumers have more flexibility to adjust their behavior, find substitutes, or change their preferences, making the demand more elastic.
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Nov 16, 2024 Last updated |
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