What is the nature of commodity, Managerial Economics

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Q. What is the Nature of Commodity ?

The nature of a commodity as well has an effect on the price elasticity of its demand. Commodities can be characterised ascomforts, luxuries and necessities, on the basis of their nature. Demand for luxury goods (for example luxury cars, decorative items etc.) are more elastic than demand for other kinds of goods as consumption of luxury goods can be set aside or delayed when their prices increase. In contrast, consumption of necessary goods, (for example clothes, sugar, vegetables etc.) can't be delayed and for this reason their demand is inelastic. Demand for comforts is generally more elastic than necessities and less elastic than the demand for luxuries. Commodities can also be categorised as durable goods and perishable or non-durable goods. Demand for durable goods is more elastic than non-durable goods, as when prices of the former rises, people either get old one fixed in place of substituting it or buy 'second hand' goods.


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