Availability of substitutes - determinants of demand, Managerial Economics

Assignment Help:

Q. Availability of Substitutes - Determinants of Demand?

One of the most important determinants of elasticity of demand for a commodity is availability of its substitutes. Closer the substitute, greater is elasticity of demand for the commodity. For example, tea and coffee could be regarded as close substitutes for one another. So if price of one of these goods increases, its demand decreases more than the proportionate rise in its price as consumers switch over to comparatively lower-priced substitute. Furthermore broader the choice of the substitutes, greater is the elasticity. For example washing powder, soaps, shampoos, toothpastes etc. are available in different brands; every brand is a close substitute for the other. So, the price-elasticity of demand for each brand would be to a large extent greater than general commodity. In contrast, salt and sugar don't have their close substitute and for this reason their price-elasticity is lower.


Related Discussions:- Availability of substitutes - determinants of demand

Average total costs (atc), Average Total Costs (ATC) This is total cos...

Average Total Costs (ATC) This is total cost per unit of output, obtained by dividing total cost by total output i.e. ATC   =   Total Cost              Total Outp

What do you mean by kinked isoquant, Q. What do you mean by Kinked Isoquant...

Q. What do you mean by Kinked Isoquant? This isoquant presumes only limited substitutability of labour andcapital. There are just a few processes for generating any one commodi

Define the simple statistical concepts of average, Define the simple statis...

Define the simple statistical concepts of average Simple statistical concepts of average (mean) and standard deviation are used.  Estimating a relationship among variables need

Advantages of perfect market, Advantages of Perfect Market It achi...

Advantages of Perfect Market It achieves, subject to certain conditions, an allocation of resources which is: socially optimal" or "economically efficient" or "pareto effi

Define concept of managerial decision-making, Define concept of Managerial ...

Define concept of Managerial decision-making Managerial decision-making draws on economic concepts as well as techniques and tools of analysis provided by decision sciences. T

State the relevant economic quantities, State the relevant economic quantit...

State the relevant economic quantities Managerial economics helps the management in predicting numerous economic quantities like profit, cost, capital, demand, price, productio

Progressive tax, PROGRESSIVE TAX A progressive income tax system is on...

PROGRESSIVE TAX A progressive income tax system is one where the higher the income, the greater the proportion paid in taxes.  This is effected by dividing the taxpayers' inco

Marginal utility approach, Marginal utility approach The downward slop...

Marginal utility approach The downward sloping nature of the demand curve can be explained by using the law of diminishing marginal utility .  For instance, consider a consum

Sales maximisation, how realistic is the sales maximisation model

how realistic is the sales maximisation model

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd