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Q. Show factors that govern the Price Elasticity of Demand?

a. The number and closeness of the substitutes- The more and the better the substitutes, the grater is the Price Elasticity of Demand. For a small percentage change in price, there would be a large percentage change in quality demanded b. Number of uses the commodity satisfied- The grater the number of uses of the commodity, the grater is its Price Elasticity of Demand. c. Time period- The grater the time period, the greater is the Price Elasticity of Demand. The percentage change in quantity demand is greater in the long run for the same percentage change in price d. Proportion of income spent on the commodity- The grater the proportion of income spent on the commodity, the larger the Price Elasticity of Demand e. How narrowly the commodity is defined- the more narrowly the commodity is defined, the greater is its Price Elasticity of Demand.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9577367

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