if a good takes up significant share of consumers budget it will be
a. Less elastic
B. More elastic
C. Perfectly elastic
D. Unitary elastic
And why
As we know price elasticity of demand depends on various factors. Such as:
Luxuries like Air Conditioner, costly furniture, fashionable garments etc. have greater than unitary elastic demand. Which implies when change in quantity demanded in response to change in price of the commodity is such that the total expenditure on the commodity increases when price decreases, and vice versa.
Here Ed > 1
- Nature of goods
- Availability of substitutes
- Diversity of uses
- Postponement of use
- Income level
- Price level
- Time period etc.
Luxuries like Air Conditioner, costly furniture, fashionable garments etc. have greater than unitary elastic demand. Which implies when change in quantity demanded in response to change in price of the commodity is such that the total expenditure on the commodity increases when price decreases, and vice versa.
Here Ed > 1