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InterviewSolution
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Write down the two main points of importance of elasticity of demand. |
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Answer» The two main points which show the importance of elasticity of demand are: (i) For Finance Minister : The finance minister imposes taxes on those whose demand is price-insecure so that tax revenues increase. Similarly, on indirect taxes, the finance minister imposes a tax on the items which have a continuous demand among the rich section and thus the burden of taxes is levied on the rich class. (ii) For Taking Over Public Utility Services : State takeing over of public utility services can also be explained with the help of elasticity of demand. Demand for public utilities such as electricity and water supply, posts and telegraphs, public transportation, etc., is generally inelastic in nature. If operation of such public utilities is entrusted to private individuals, they are likely to exploit the consumer. Therefore, in the interest of social welfare, the government owns and runs such services. |
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