Determinants of Price Elasticity of Demand

The video tutorial explains the concept of price elasticity of demand, using petrol and Dairy Milk chocolate as examples. It discusses the determinants of elasticity, including substitutability, necessity, income proportion, product definition, and time period. Each determinant is explored with examples to illustrate how they affect the elasticity of a product. The tutorial concludes by emphasizing that the price elasticity of demand is influenced by a combination of these factors.

What is the main characteristic of an inelastic product like petrol?

• Demand remains relatively stable despite price changes.

• Demand is unaffected by any price changes.

• Demand decreases significantly with a price increase.

• Demand increases with a price increase.

Why is Dairy Milk chocolate considered an elastic product?

• It has many good substitutes.

• It is widely defined.

• It is a necessity.

• It has no substitutes.

How does the necessity of a product affect its price elasticity?

• Necessities are always perfectly elastic.

• Necessities are less elastic.

• Necessities are more elastic.

• Necessities have no elasticity.

What happens to the price elasticity of a product if a large percentage of income is spent on it?

• It becomes perfectly inelastic.

• It remains unchanged.

• It becomes less elastic.

• It becomes more elastic.

How does the definition of a product influence its price elasticity?

• The definition has no impact on elasticity.

• A stricter definition makes it more elastic.

• A wider definition makes it more elastic.

• A stricter definition makes it less elastic.

In the long run, how does the demand for petrol change with price increases?

• Demand becomes perfectly inelastic.

• Demand becomes less elastic.

• Demand becomes more elastic.

• Demand remains the same.

Which factor is NOT a determinant of price elasticity of demand?

• Substitutability

• Necessity

• Time period

• Brand popularity