Question

Factors Affecting the Elasticity of Demand

The availability and the closeness of substitutes (more substitutes, more elastic)

The percentage of the consumer's budge (larger proportion of the budget, more elastic)

Positioning as income superior (Products that are viewed as superior goods with large income elasticities, tend to be more elastic.)

Time period of adjustment (more time, generally, more elastic)

All of the above

Answer 1

All the above statements are correct.

So answer will be – All the above.

If we seen the factors that affect the elasticity of demand, there are factors like

1. The availability and the closeness of substitutes (more substitutes, more elastic).

The more the number of close substitutes of a good available in the market, more the elasticity for that good.

2. The percentage of the consumer's budge (larger proportion of the budget, more elastic)

If a consumer spends a big share of his income to purchase a specific product, then the demand for that product would be elastic.

3. Positioning as income superior (Products that are viewed as superior goods with large income elasticities, tend to be more elastic.)

The price elasticity of demand for superior and high priced goods (luxuries) is always tends to be more elastic. In case of necessesities, the demand will be inelastic.

4. Time period of adjustment (more time, generally, more elastic)

In long run time period the elasticity of demand will be more elastic. This is because over a period of time, consumers get adjusted to change in prices or new prices.

Therefore, all the above statements are correct.