How the Price Elasticity Homework Answers Is Determined?
Price Elasticity is the ratio between the changes in the demand of a product with the change in the price of the product. It is expressed in percentage which is almost always negative. The Price Elasticity is positive for only exceptional cases like that of Veblen and Giffen goods.
Determinants of the Price Elasticity Assignment Answers:
The determinants of the Price Elasticity Homework Answers are as follows:
The availability of substitute goods is an important determinant of the Price Elasticity Homework Answers of a product. With the presence of such substitute goods, the demand for the product changes drastically for even a small change in the price of the product. Hence, the demand of the product will be elastic. While the absence of any substitute goods results in no or lesser change in the demand of the product when the price changes. Thus, the demand will be inelastic.
The Price Elasticity Assignment Answers of a product depends on the level of disposable income of the consumer. The larger the price component of the product in the consumer’s income the larger will be the elasticity of the product. When the price of the good represents a smaller part of the income of the consumer, then the demand of the product will be inelastic for the consumer.
The necessity of the product determines the Price Elasticity Homework Answers of the product. If the product is necessary for the consumer then the consumer will buy it irrespective of the change in the price of the product. Thus, the price elasticity of such a product is inelastic. If the product does not have the same level of necessity such that the consumers will curtail the purchase of the product due to increase in price then the product is said to have an elastic demand.
If the price change of a product takes place for a longer period of time then the consumer will have a longer period to search for substitutes. Thus, the Price Elasticity Homework Answers of the product is elastic. So, the larger the duration of the price change of a product, higher the chances of the demand of the product becoming elastic.
If the product enjoys customer loyalty due to the company, services or features of the product, the Price Elasticity Assignment Answers will be inelastic. This is because the customers will buy the product irrespective of the price change out of loyalty to the brand associated with the product.
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