How does nature of commodity influence its elasticity of demand?
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The elasticity of demand for a good depends upon the nature of the good, i.e., whether the good is a necessary or a luxury good. The elasticity of demand for a necessary good is relatively small. For example, if the price of such a good rises, its buyers generally are not able to reduce its demand.
Again, if the price of a necessary good diminishes, the buyers cannot considerably increase their purchase of the good, since the good is a necessity, they had been purchasing the required quantities at the previous price. For example, rice is very much a necessary good to us, and so its demand cannot be reduced considerably when its price rises.
Again, if the price of a necessary good diminishes, the buyers cannot considerably increase their purchase of the good, since the good is a necessity, they had been purchasing the required quantities at the previous price. For example, rice is very much a necessary good to us, and so its demand cannot be reduced considerably when its price rises.
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When a commodity is a necessity like food grains, vegetables, medicines, etc., its demand is generally inelastic as it is required for human survival and its demand does not fluctuate much with change in price. ii.
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