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Theory of consumer behaviour — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsTheory of consumer behaviour3 Marks
Question
Explain any two factors that affect the Price Elasticity of Demand. Give suitable examples.
OR
Explain any two factors that affect Price Elasticity of Demand.
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Answer

Two factors that affect Price Elasticity of Demand are as follows:
  1. Availability of Substitutes: The demand for commodities having close substitutes is very elastic because if there is an increase in the price of a commodity, people will start using substitute commodities.
  2. Proportion of Income Spent on the Goods: Items such as thread, needle will have an inelastic demand as consumers spend a small proportion of their income on such items. On the other hand, goods on which the consumers spend a large proportion of their income (clothes, food items, etc) tend to have elastic demand.

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