Elasticity Of Demand - SS1 Economics Past Questions and Answers - page 1

Elastic demand refers to a situation where a small change in price leads to a relatively larger change in the quantity demanded. On the other hand, inelastic demand refers to a situation where a change in price results in a relatively smaller change in the quantity demanded.

Three factors that affect the elasticity of demand include:

• The necessity of the product: If a product is considered a necessity, consumers may continue to purchase it even if the price increases, making the demand for the product more inelastic.

• Income of consumers: When consumers have a higher income, they may be less sensitive to price changes, making the demand for the product more inelastic.

• Time: The longer the time period consumers have to adjust to a change in price, the more elastic the demand becomes, as they have more time to search for substitutes or adjust their consumption patterns.