Question

Price elasticity of demand measures consumers’ responsiveness to changes in the price of a good. There are a number of variables that affect consumers’ decisions, among them the following:

• The availability of substitutes
• The specific nature of the good
• The part of income spent on the good
• The time consumers have to buy the good

Please draw on your experiences as a consumer and your Unit 2 readings to address the following 4 topics. Make sure you use economic concepts in your main contribution.

1. Choose a product that you have purchased in the past 1–3 months from a clothing or shoe store.
2. Describe how each of the 4 factors listed above contributed to the elasticity of the good.
3. Is the product considered elastic, inelastic, or unitary elastic?
4. What effect does the current supply and current demand have on this product?

Answer 1

Price Elasticity of demand:

Price is elasticity of demand measures the responsiveness of demand of a good to a change in price.

1.Availability of close substitute:

A good have close substitute will have an elastic demand and a good with no substitute will have an in-elastic demand,ex.goods such price as pen,cold drinks,car,etc..have close substitute,when the price f goods rise,the price of substitute remaining constant,there is proportionally greater fall in the quantity demand of these goods,that is,their elastic, commodity such as prescribed medical and salt have no close substitute and hence,have an in elastic demand.

2.Time period:

If the time period needed to find substitute of commodity is more,the price Elasticity of demand is more and vice versa,ex.flying by acroplane has in elastic demand as no substitute are available in the short run.

Past 1-3 month I was purchase a cloth, it's elastic,bec because doesn't have the character of intrinsic.

Nature of commodity:

Demand of a commodity is fully influenced by it's nature,necessities u it's nature,nessities of life is less elastic,demand for luxary goods is more elastic compare than necessities.

Income spend on goods:

If income level is high elasticity is less, because of change in the price will not affect the quantity demand by a greater proportion,but in low income elasticity is high.

An effect,if demand for cloth increase the supply for the cloth remain unchanged,if demand for cloth decrease supply of cloth remain unchanged because of higher price and quantity.