Skip Nav

What factors influence a change in demand elasticity?

Income Level

❶For, when the price is very small, a change in price would have no considerable effect on demand.




Substitute Availability If there is a readily available substitute for a good or service, the substitute affects the elasticity of demand of that good or service. Learn how the price elasticity of demand is more sensitive for some types of consumer goods than others, and see what factors Learn the basics of price elasticity of supply and demand and how each influences a company's production of goods and pricing Learn how variations in price elasticity affect the supply and demand curves and what factors cause differences in elasticity.

Learn about the supply elasticity of goods and services, some factors that influence supply elasticity and how these factors Find out how elasticity of demand and inelasticity of demand are two sides of the same coin, based on the calculated elasticity Learn more about how the income and substitution effects operate in economics. Find out how to separate either of these while Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.

Learn how supply, demand and pricing are interrelated by studying the concepts used by economists to measure pricing fluctuations. Learn about the improving stock performance and rising debt-to-asset ratios in the United States blue-chip consumer staples sector. Greater the proportion of income spent on the commodity, more is the elasticity of demand for it and vice-versa.

Demand for goods like salt, needle, soap, match box, etc. When prices of such goods change, consumers continue to purchase almost the same quantity of these goods. However, if the proportion of income spent on a commodity is large, then demand for such a commodity will be elastic. Price elasticity of demand is always related to a period of time. It can be a day, a week, a month, a year or a period of several years. Elasticity of demand varies directly with the time period.

Demand is generally inelastic in the short period. It happens because consumers find it difficult to change their habits, in the short period, in order to respond to a change in the price of the given commodity. However, demand is more elastic in long rim as it is comparatively easier to shift to other substitutes, if the price of the given commodity rises.

Commodities, which have become habitual necessities for the consumers, have less elastic demand. It happens because such a commodity becomes a necessity for the consumer and he continues to purchase it even if its price rises. Alcohol, tobacco, cigarettes, etc. Finally it can be concluded that elasticity of demand for a commodity is affected by number of factors.

However, it is difficult to say, which particular factor or combination of factors determines the elasticity. In such a case, the demand for milk would be highly elastic. On the contrary, if the price for these goods increases, there use would be restricted to urgent purposes only. Acts as a crucial factor in influencing the price elasticity of demand.

For example, an increase in prices of any product would not affect the demand for products consumed by a millionaire. On the other hand, demand for products consumed by lower or middle income consumers would be highly sensitive to change in the price.

For example, if the price of mobile phones increases, then the demand for mobile phones would be inelastic in high income group, whereas it would be highly elastic in lower and middle income group consumers.

Refers to the fact that demand for high-priced goods, such as expensive gold and diamond jewellery and imported cars, is inelastic. The change in the price of these goods produces a very small change in their demand. Similarly, the demand for low-priced goods, such as cheap potatoes and match boxes, is also inelastic. This is due to the fact that consumers have already purchased these goods in sample quantities; therefore, change in the price of these goods causes a little change in their demand.

Apart from this, the demand for medium-priced goods that are neither very costly nor very low cost is elastic. The demand for medium-priced goods is very sensitive to change in their prices. Refers to another important factor that determines the price elasticity of demand. Therefore, consumers continue to purchase the same quantity of these goods even in case of increase in their prices. Implies that the price elasticity of demand largely depends on time that consumers take to adjust themselves with new prices of a product.

The longer the period of time, higher the price elasticity of demand. This is due to the fact that over a period of time, consumers get adjusted to change in prices or new prices. For example, if the price of petrol decreases, then it would not result in immediate increase in its demand until consumers have purchasing power to buy vehicles.

However, over a period of time, consumers might be able to adjust their expenditure and consumption patterns, so that they can purchase vehicles spurred by fall in the prices of petrol.


Main Topics

Privacy Policy

Elasticity of demand depends on the nature of goods. The elasticity of demand for a commodity depends upon the necessity of it for a human life. Goods may be necessary for human life, comfort or luxurious. Necessary goods are extremely essential so the demand for these goods-is inelastic.

Privacy FAQs

The price elasticity of demand is not the same for all commodities. It may be or low depending upon number of factor. These factors which influence price elasticity of demand, in brief, are as under.

About Our Ads

Demand elasticity is the sensitivity of the demand for a good or service due to a change in another factor. There are many factors that influence a change in demand elasticity. These factors. Demand elasticity measures how sensitive the quantity demanded of a good or service is to changes in other variables. Many factors are important in determining the demand elasticity of a good or.

Cookie Info

The following points highlight the seven main factors affecting the price elasticity of demand. The factors are: cliffdockery6ovpcj6.ga of the Good cliffdockery6ovpcj6.gability of Substitute Goods cliffdockery6ovpcj6.ga and Variety of Uses of the Product cliffdockery6ovpcj6.gation of Income Spent on the Good cliffdockery6ovpcj6.ga of Habits cliffdockery6ovpcj6.gaility of Deferment of Consumption cliffdockery6ovpcj6.ga of the Good. What are the main factors that affect the coefficient of price elasticity of demand? A number of factors come into play in determining whether demand is price elastic or price inelastic in a given market. tutor2u. Subjects Events Job board Shop Company Support Main menu. Factors affecting price elasticity of demand.