What factors affect the elasticity of demand?

Answer 1

There are plenty of factors affecting elasticity of demand including climate of the area. Other factors that effect elasticity of demand include supply and group of people buying.

Answer 2

The price elasticity of demand for a particular demand curve is influenced by the following factors:

• Availability of substitutes: the greater the number of substitute products, the greater the elasticity.
• Degree of necessity or luxury: luxury products tend to have greater elasticity than necessities. Some products that initially have a low degree of necessity are habit forming and can become "necessities" to some consumers.
• Proportion of income required by the item: products requiring a larger portion of the consumer's income tend to have greater elasticity.
• Time period considered: elasticity tends to be greater over the long run because consumers have more time to adjust their behavoir to price changes.
• Permanent or temporary price change: a one-day sale will result in a different response than a permanent price decrease of the same magnitude.
• Price points: decreasing the price from $2.00 to $1.99 may result in greater increase in quantity demanded than decreasing it from $1.99 to $1.98.

Answer 3

Essential or non-essential good, Availability of substitutes, Time. when large numbers of close substitutes exist demand for that product tends to be elastic as consumers have alternatives. >Also, don't forget "the proportion of the price of the good (p) relative to income (y)".

Answer 4

Factors Effecting the Elasticity of Demand - 20

Good with close substitutes tend to have elastic demand curves. The demand for good ''A'' is ''price sensitive'' to changes in the price of good ''B'', because they both satisfy the same want. The demand for one brand of butter will vary, if another brand is put on ''special'' at your local supermarket.

''Necessities'' tend to have inelastic demand curves. If households see a good as essential to daily living, demand for the good will be ''price insensitive''. For example, if the price of milk rose by 50 cents a litre, demand for milk would not change greatly. All households want milk.

Luxuries on the other hand tend to have elastic demand curves. If soft drinks are put on ''special'' at your local supermarket, and their price is lowered, demand for them will rise markedly. Part of this ''necessities'' versus ''luxuries'' distinction is based on the cost of the item. Many necessities are inexpensive: they have low prices - a loaf of bread, a litre of milk, a box of matches, all only cost a very small part of your available disposable income. An increase in the price of a litre of milk of 50 cents is still ''small change'' for many consumers, and they will continue to demand milk at the same levels as they did before the price rise. Luxuries on the other hand can be very expensive and cost a large part of your available disposable income. You may decide not to buy that French champagne to celebrate a birthday, if the price rises from $30 to $32. The price of $30 is already a large enough disincentive.

Some goods are habit forming, or addictive. Cigarettes are a clear example. Once ''hooked'', the average smoker will continue to pay more and more for cigarettes, as governments increase taxes on tobacco. Very few smokers give up smoking because of price increases; most give up for health reasons.

Answer 5

Three of the factors on elasticity of demand are necessity vs. luxury, availability of substitutes, and relative importance.

Answer 6

Substitutes