Question

How is price elasticity of demand affected by number of substitute available for good nature of the good...... give one situation in which elasticity of supply is low even when there is substantial rise in the price related to rise in demand for a commodity

Answer 1

Demand and Supply Theory is essential for an understanding of economics.

It has been argued that certain relationships exist between price and quantity demanded and supplied, other things remaining constant.

But if price changes, by how much does quantity demanded or supplied change? It could be that a large price increase/decrease will have little effect of quantity demanded or supplied.

On the other hand, a small price increase/decrease might result in a substantial change in demand or supply. Theoretically it is impossible to say exactly what will happen in cases like these. Each product may have a different price-quantity reaction. It is a matter for economists to collect evidence and calculate this relationship.

However, theoretical economists can provide a useful guidance for studying this relationship. Elasticity is a measure of the relationship between quantity demanded or supplied and another variable, such as price or income, which affects the quantity demanded or supplied.