A necessity
A luxury
Has little importance in total budget
a' and 'c' above
Answer is Right!
Answer is Wrong!
The correct answer is: D. a’ and ‘c’ above
Elasticity of demand is a measure of how responsive consumers are to changes in price. A commodity with low elasticity of demand is one for which consumers are relatively insensitive to changes in price. This means that even if the price of the commodity goes up, consumers will still buy it, and even if the price goes down, consumers will not buy much more of it.
There are two main reasons why a commodity might have low elasticity of demand:
- The commodity may be a necessity. This means that consumers need the commodity to survive or to live comfortably. For example, food and water are necessities, and most people will continue to buy them even if the price goes up.
- The commodity may have little importance in the consumer’s total budget. This means that the commodity is a small part of the consumer’s spending, and so even a large change in price will not have a big impact on the consumer’s budget. For example, a \$1 change in the price of a \$100 pair of shoes is not going to make much difference to the consumer’s budget.
In conclusion, a commodity with low elasticity of demand is one for which consumers are relatively insensitive to changes in price. This can be because the commodity is a necessity or because it has little importance in the consumer’s total budget.