Factors Affecting Price Elasticity Of Demand Essay

Factors Affecting Price Elasticity Of Demand Essay-29
Durable commodity is used over a long period of time.

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Thus the elasticity of demand for such commodities is elastic. Availability of substitutes: The demand for a commodity having perfect substitute is relatively more elastic. People use those commodities for certain urgent use in response to a rise in price.

If a flood gives the same pleasure and satisfaction in place of the consumption of another commodity, it is called a substitute commodity. Close substitute has got more elastic demand and remote substitute has less elastic demand. For example electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. Possibility of postponing consumption: The demand for those goods whose consumption can be postponed for sometime is said to be elastic.

Once a durable good is bought the buyer feels no want of it for a long period of time.

Thus the change (rise or fall) in price can’t influence the demand. On the other hand less durable or perishable goods are consumed repeatedly. Thus the demand for perishable goods is less elastic. Income level: Elasticity of demand depends on income level.However, the extent to which a price change impacts the demand differs widely from produce to product.PED=(change in quantity demanded)/(change in price). If this value is bigger than one, the product is said to be price elastic (price sensitive), whereby a change in price will lead to a greater than proportionate change in quantity demanded.High priced commodities are luxurious goods and low priced goods are necessaries.Luxurious goods are mainly consumed by the people of high income brackets.Thus for rich people the demand for Horlicks is inelastic whereas for poor people the demand for the Horlicks is elastic.Disclaimer: This work has been submitted by a student.Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.There are generally three types of elasticity of demand, which are price, cross-price and income elasticity of demand.These three will be explained individually in order in the following paragraphs.Price elasticity of demand is a measure of the responsiveness of change in quantity demanded of a good/service to a change in price, ceteris paribus.

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