How is the magnitude of price elasticity for an individual good determined?
[amp_mcq option1=”1, 2 and 3″ option2=”1 and 4 only” option3=”1, 2 and 4″ option4=”3 and 4″ correct=”option1″]
This question was previously asked in
UPSC CAPF – 2021
Based on the common factors determining price elasticity and likely intended factors for this question (although the factors 1, 2, 3, 4 were missing in the prompt), the combination of factors 1, 2, and 3 is the most accurate choice among the given options. Assuming factors 1, 2, and 3 refer to the nature of the good (necessity/luxury), availability of substitutes, and proportion of income spent, respectively, these are all significant determinants.
Key factors that determine the price elasticity of demand for a good include: 1. The nature of the good (necessity vs. luxury); 2. The availability and closeness of substitutes; 3. The proportion of income spent on the good; and 4. The time period under consideration (short run vs. long run).