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Explain the influence of following on price elasticity of demand of a good: (i) Substitute goods, (ii) Own price of the good.

Answer» <html><body><p></p>Solution :1.Availability of Substitute Goods:If <a href="https://interviewquestions.tuteehub.com/tag/close-408965" style="font-weight:bold;" target="_blank" title="Click to know more about CLOSE">CLOSE</a> substitutes for a particular good are available in the market, then the <a href="https://interviewquestions.tuteehub.com/tag/demand-436956" style="font-weight:bold;" target="_blank" title="Click to know more about DEMAND">DEMAND</a> for the good would be relatively more elastic. For example, since tea, a close substitute for coffee, is available in the market, a <a href="https://interviewquestions.tuteehub.com/tag/rise-1189674" style="font-weight:bold;" target="_blank" title="Click to know more about RISE">RISE</a> in the price of coffee would result in a considerable fall in its demand and a consequent rise in the demand for tea.2. Price of the Good:The elasticity of demand for a good also depends on its own price. As price changes, quantity demanded of the good changes, <a href="https://interviewquestions.tuteehub.com/tag/owing-2905954" style="font-weight:bold;" target="_blank" title="Click to know more about OWING">OWING</a> to the law of demand. Also, at different prices of the product, i.e., at different <a href="https://interviewquestions.tuteehub.com/tag/points-1157347" style="font-weight:bold;" target="_blank" title="Click to know more about POINTS">POINTS</a> on the demand curve for a good, the coefficient of price-elasticity of demand for the good would be different</body></html>


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