Factors determining the elasticity of Demand:
Factors determining the elasticity of Demand:
- Degree of necessity:
If goods are very essential then such goods? demand is inelastic. If they are not very necessary for human life then demand for goods is elastic. - Proportion of customers income spending on the commodity:
If people spend small amount form the income upon a commodity then demand of such commodity is inelastic but if they spend huge part of their income for the commodity then its demand is elastic. - Existence of substitute good:
If there is available of close substitute goods then in this case demand is elastic but if there is no close substitute of commodity then demand is elastic. - Habit:
If goods are related to the taste and preference then demand of such goods is inelastic and vice-versa. - Several use of commodity:
If goods are of multipurpose then its demand is elastic but if it is use for single purpose its demand is inelastic. - Postponement:
If consumers can post pond the need of goods then its demand is elastic but if they can?t be post-pond then its demand is inelastic. - Range of Price:
If the commodities are of low price range and high price, demand for these goods is inelastic but if they are of middle price range then its demand is elastic. - Time Period:
If time period is shorter, there is no chance to change choice then demand for those goods is inelastic but is time period is long then demand is elastic. - Income level:
The commodity which is purchased by low and high level income earner then demand is inelastic but in the case of middle income earner demand is elastic.