Factors Determining Price Elasticity of Demand

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Factors Determining Price Elasticity of Demand

It is not possible to classify goods according to the nature of their demand and lay down rigid rules to determine whether demand in any particular case is elastic or inelastic. We call only osculation some general rule in this connection.

We know that elasticity is relative. For one person or at one place, the demand yum be elastic and. for another person and at another place. it may be inelastic. Subjected to this important proviso, we may lay down the following rules:

Necessaries liniment Subservience«. We must buy fixed quantities if such conditions, whatever the price. In a poor country like India, even the demand for things like salt is somewhat elastic. In Indian in 1923, the doubling of the salt duty reduced the consumption or salt. The change in the price .If wheat may he immaterial for upper classes, but its consumption will certainly increase among the poor when tile price falls

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change in price has no effect on quantity demanded. This is referred as perfectly inelastic demand. The government in Taoist of the developing countries Lyrics to impose more tax on such type of goods. as these goods arc essential or necessary goods category, and people cannot change the demand even if pi ice is ‘increasing or decreasing.

Relatively elastic demand. In this case the change in price is less, where as its corresponding effect on change on demand is more (the Edmund curve is flatter.

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In this diagram at price  quantity is demanded. If the price changes from (reduced) then, quantity demanded increases.

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Factors Determining Price Elasticity of Demand