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Cross-Price and Income Elasticities

How does the ...

Question

How does the nature of a commodity influence its price elasticity of demand?

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Solution

A commodity for a person may be a necessity, a comfort or a luxury.

When a commodity is a necessity its demand is generally inelastic.

When a commodity is a comfort its demand is generally elastic.

When a commodity is a luxury its demand is generally more elastic than the demand for comforts.

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