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4) Which factors determine the firm's elasticity of demand? A) Elasticity of market demand and number...

4) Which factors determine the firm's elasticity of demand? A) Elasticity of market demand and number of firms B) Number of firms and the nature of interaction among firms C) Elasticity of market demand, number of firms, and the nature of interaction among firms D) none of the above

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Answer #1

Answer: C) Elasticity of market demand, number of firms, and the nature of interaction among firms.

Three factors that determine the firm's elasticity of demand are as follows:

  • Elasticity of market demand
  • Number of firms in the market and
  • Interaction among firms in the market

Three main factors that influence a good’s elasticity of demand:

  • Availability of Substitutes
  • Necessity
  • Time

Elasticity of demand is the responsiveness of the quantity demanded of a commodity to changes in variables on which demand depends.

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