Read the passage carefully and answer the questions based on the passage: Elasticity of Demand The demand for a good moves in the opposite direction to its price. But the impact of the price change is always not the same. Sometimes, the demand for a good changes considerably even for small price changes. On the other hand, there are some goods for which the demand is not affected much by price changes. Demands for some goods are very responsive to price changes while demands for certain others are not so responsive to price changes. Price elasticity of demand is a measure of the responsiveness of the demand for a good to changes in its price. The price elasticity of demand for a good depends on the nature of the good and the availability of close substitutes of the good. |
If the price of necessity good like clothes changes, what will be the effect on its demand? |
Elastic Less Elastic Inelastic More Elastic |
Inelastic |
The correct answer is Option (3) → Inelastic Necessity goods like clothes are essential for daily life, so their demand does not change much even when prices rise or fall. This means that the demand is inelastic, i.e., less responsive to price changes. |