Question

Which of these factors DO NOT influence the elasticity of demand?

necessity

Number of sellers

changes in income

availability of substitutes

expectation of future price

Answer 1

Option B - number of sellers do not influence the elasticity of demand.

• Elasticity of demand refers to the responsiveness of a goods demand by the customers based on the changes in its price level.
• The various factors that can influence elasticity of demand are: Necessity goods, changes in income, availability of substitues, expectations of future price.
• Necessity - necessities are those goods whose use is unavoidable and people are indifferent to its use even if it's price changes, hence necessities are said to have inelastic demands.
• Changes in income - when customers income increases, their demand becomes inelastic and the demand becomes elastic when their income changes.
• Availability of substitues - greater the number of substitues for a good, greater is its elasticity of demand.
• Expectations of future price - the demand for a good Increases or decreases with an increase or decrease in the future expectations of price respectively. When prices are expected to rise in future, the current demand for goods and services Increases. Similarly when prices are expected to fall in future, the current demand decreases and future demand for goods and services Increases.