Question

8. Which of the following factors will indicate that good is elastic?

A) small number of substitutes.

B) this good is a necessary good.

C) the market for this good is narrowly defined.

D) you consider this good in the short-run.

Answer 1

Since the elasticity of demand can be defined as the measurement of the degree of the responsiveness of the quantity demand due to the change in the price level.

If the consumer is relatively responsive to a change in the price, the demand is said to be elastic.

Determinants of elasticity of demand are;

Availability of substitutes; The goods which have many substitutes, has elastic demand while the goods which has no substitutes, has inelastic demand.

2.

Types of goods;

The necessary goods have inelastic demand while luxury goods have elastic demand.

3.

Availability of Substitutes: The substitutes are the goods which can be used in place of each another. The goods which have close substitutes, these goods have elastic demand.

On the other hand, if there are no close substitutes for a product, then its demand is said to be inelastic.

4.

Number of uses of a commodity: the goods which have larger the number of uses of a commodity, the elasticity of demand of this will be elastic. On the other hand, ifthere is a single use of commodities, then this kind of goods have inelastic demand.

5. Time period. Since in short-run supply of goods cannot be increased, therefore demand for good is inelastic in short-run compare to long-run.

It means only option C is remaining, therefore option third indicate elastic demand.

It means that the market for this good is narrowly defined will be considered elastic demand.

Hence option c is the correct answer.