(a) Increase in Demand—Increase in demand refers to a situation when the consumers buy larger amount of a commodity at the same existing price. Increase in demand may take place due to rise in income, a change in taste, rise in the price of substitutes, a fall in prices of complementary goods, increase in population, redistribution of income, etc. Factors Affecting Price Elasticity of Demand
1. Availability of substitutesp—A commodity with more and close substitutes tends to have an elastic demand and one with a few weak substitutes has an inelastic demand.For example: If price of Pepsi falls, a large number of consumers will switch over the Pepsi from Coke. On the other hand when the price of milk increases, the quantity demanded will not decrease much and vice versa.
2. Proportion of Income Spent—Smaller is the proportion of Income spent on a commodity, the smaller will be the elasticity of demand and vice-versa. For example: The demand for soap, salt, matches, etc. is highly inelastic since the consumer spends a very small proportion of his income on them. 3. Habits of the consumer—Price elasticity of demand depends also upon whether or not the consumers are habitual of using a commodity. If consumers are habitual of consuming some commodities, they will continue to consume these even at higher prices. The demand for such commodities will be usually inelastic.
4. Time Factor—Price Elasticity is generally low for the short period as compared to long period. This is for 2 reasons—
Firstly—It takes time for consumers to adjust their tastes, preferences and habits. Secondly, new substitutes may be developed in the long run.
(b) “Land is a specific factor or that it is the specific element in a factor or again that it is the specific aspect of a thing.” —Prof. J. K. Mehta
The term ‘land’ generally refers to the surface of the earth. But in economics it includes all that, which is available free of cost from ‘nature’ as a gift to human being. Land stands for all nature, living and non living which is used by man in production.
Importance of Land as a factor of Production—In every kind of production, we have to use land. Therefore land is a basic factor of production.
1. In industries, it helps to provide raw material.
2. It provide space/surface for setting up the sites for industrial infrastructure.
3. In Agriculture, land is considered as the main factor of production as crops are produced on land.
4. All sources of power i.e. hydro electricity, thermal power, diesel, coal, oil, etc. emanate from land.
Fundamentally speaking, ‘land’ is the original source of all material wealth and it is of immense rise to mankind. Inspite of being a passive factor, it is an important factor of production. An overall economic prosperity of a country is directly related to the richness of its natural resources.
