Factors affecting the price elasticity of demand, Macroeconomics

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Q. Discuss about the factors affecting the Price Elasticity of Demand.

a. Availability of Substitute- Availability of close substitute is important determinants of elasticity of demands. The higher the degree of closeness of the substitutes the greater the elasticity of demand for the commodity b. Nature of commodity- The nature of commodity also affects the price elasticity of its demand. Commodities can be grouped or luxuries, comforts, and necessities c. Weightage in the total consumption- The influences of elasticity of demand is the proportion of income which consumers spend on a commodity is large, its demand will be more elastic d. Time factor in adjustment of consumption pattern- Price elasticity of demand depends also on the time consumers need to adjust their consumption pattern to a new price., in larger run greater the price elasticity e. Range of Commodity use- It also influence the price elasticity demand. The wider the range of the uses of a product, the higher the elasticity of demand for the increase in price f. Proportion of Market Supplied- The elasticity of Market demand also depends on the proportion of the market supplied at the ruling price.


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