6468086 - of subsitutes are available which is likely to...

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1. The substitutability of a particular good/service can play havoc on a company’s sales. This is formally defined as elasticity of a good/service. The elasticity/substitutability changes for 4 reasons. The 4 reasons are stated below, briefly describe/explain them. a) The larger the time interval - the elasticity is likely to increase with the time horizon. The reason behind the same is that the behavior, preferences and taste of the consumer changes along with the time. With change in time the preferences changes which states an elastic demand of goods. b) Broader definition – there are wide range of availability of goods and services i.e. wide range
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Unformatted text preview: of subsitutes are available which is likely to increase the elasticity of goods. c) Depends on the size relative to a persons budget - as there is a particular portion of the income which consumer devotes for purchasing goods, if the price of a particular goods increases then the demand of the same will decrease as the consumer still devotes a particular portion on the good. d) The more the good/service is a necessity - as availability of more substitutes will give more options to the consumer, at the change in price of one substitute the consumer will switch over to another product....
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