What are the main determinants of demand elasticity? Explain their importance.
What will be an ideal response?
First is the nature of the good. Necessities have less-elastic demand than do luxury goods. Second is the availability of close substitutes. The more substitutes exist and the closer they are to the original good, the more elastic demand will be. Third is the fraction of income absorbed; the smaller the fraction of income spent on an item, the more elastic demand will be. Fourth is the passage of time; the more time that passes after a price change, the greater the demand elasticity.
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Each year Apple Computers produces a new line of IPods with greater storage capacity and more features. Sales continue to soar even though the prices each year rise as well
Is this a refutation of the law of demand or is there something else going on here that doesn't meet the eye?
Consumption spending is $16 million, planned investment spending is $4 million, unplanned investment spending is $2 million, government purchases are $6 million, and net export spending is $1 million. What is aggregate expenditure?
A) $22 million B) $26 million C) $27 million D) $29 million