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Elasticity of Demand

With other th...

Question

With other things equal, if a commodity has more substitutes, its price elasticity of demand is:

[1 mark]

A

Larger

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B

Smaller

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C

Zero

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D

Unity

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Solution

The correct option is A Larger
If the price of the commodity increases, the consumer can shift its substitutes so that it makes the elasticity larger or higher.

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Q. If a good has close substitutes, the price elasticity of demand for a commodity will be __________ as some other commodities can be used as a substitute to it.

Q. “The Law of Demand states other things being equal, the quantity demanded of a commodity increases when its price falls and decreases when its price rises. There are several assumptions of the Law of Demand.”
If we refer to the determinants of demand, then ‘other things’ in the Law of Demand refers to which of the following?

[1 mark]

Q. When the price elasticity of demand for a commodity equals infinity, ______.

[1 mark]

Q. “The Law of Demand states other things being equal, the quantity demanded of a commodity increases when its price falls and decreases when its price rises. There are several assumptions of the Law of Demand.”
Which of the following is an assumption of the Law of Demand?

[1 mark]

If price elasticity of demand is zero, it means expenditure on the commodity does not change with change in price of the commodity.

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