Question

Study the responsivess of demand for commodities like salt matchboxes candles television food grains with respect to incomes level of five families

Answer 1

Answer:Considering the items that have specific nature of being a necessity such as salt as it is used for daily consumption in preparation of food in almost all the households, Matchbox could be considered as a necessity such in an Indian Household wherein doing pooja and lighting up a diya forms part of daily chores and food grains similarly follow the same route as above. However, television, considered of luxury nature would have a different treatment for responsiveness. We will refer to Income Elasticity of Demand for this and explain this demand responsiveness.

Explanation: So grouping the items into two headings namely Necessity and Luxury, we can observe that any change in levels of income through referring theory of eleasticty (XED: Income Elasticity) any change in income is unlikely to affect the responsiveness in demand for items of necessity and daily use so the it would items of low or zero elasticity as any change either ways is unlikely to impact the quantity demanded for five families.

For the items of luxury we can say the product/good would have high income elasticity as five families are unlikely to have same levels of income so for this we would assume that family 1-5 have increasing patterns of income and have 3 members in each. It more likely that in familiy number 5 they have Television for each of the member due the fact a good with High income elasticity means any increase in income levels leads to relatively more impact in quantity demanded for the good. Similarly family number 1 might only have one TV set for entire family.