Question

The factor affecting elasticity of demand is

• A. Nature of goods
• B. Price level
• C. Income level
• D. All of these

Hint:

Many things affect demand elasticity: Is it a need or a want? How much does it cost? How much money do I have?

Answer 1

The Correct Option is D

The price elasticity of demand is influenced by several factors:

(A) Nature of goods: Necessities (like salt) tend to have inelastic demand, while luxuries (like sports cars) have elastic demand.
(B) Price level: Goods that take up a very small portion of a consumer's budget (low price level) tend to have inelastic demand (e.g., matches).
(C) Income level: The elasticity of demand for a good can differ for high-income and low-income consumers.
Other factors include the availability of substitutes, number of uses, and time period.
All the given options are valid factors affecting the elasticity of demand.