Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Consumer behaviour

Question:

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?

Options:

Elastic

Less Elastic

Inelastic

More Elastic

Correct Answer:

Inelastic

Explanation:

The correct answer is Option (3) → Inelastic

 

  • Necessities: Items like basic clothing, food, and medicine are essential for survival. Even if the price of these goods increases, consumers cannot significantly reduce their consumption because they need them to function daily.

  • Responsiveness: Since the demand does not change "considerably" even when the price moves, the demand is termed inelastic.

NCERT: "The price elasticity of demand for a good depends on the nature of the good and the availability of close substitutes of the good. Consider, for example, necessities like food. Such goods are essential for life and the demands for such goods do not change much in response to changes in their prices. Demand for food does not change much even if food prices go up. On the other hand, demand for luxuries can be very responsive to price changes. In general, demand for a necessity is likely to be price inelastic while demand for a luxury good is likely to be price elastic."