Question

Identify the factor which generally keeps the price-elasticity of demand for a good low.

• A. Variety of uses for that good
• B. Its low price
• C. Close substitutes for that good
• D. High proportion of the consumer's income spent on it

Answer 1

Answer: (B)

Its low price

$\Rightarrow$ Lower the price of the good, the lower is its response to change in prices i.e. lower is the price elasticity.

$\Rightarrow$ Demand of a commodity having very low price will not be effected with price fluctuations. The above explanation is due to the fact that a low priced commodity has a small place in consumer's budget.

$\therefore$ The factor which generally keeps the price-elasticity of demand for a good low is its low price.