Determinant of price elasticity

The five main factors which determines the price elasticity of demand for a commodity are as follows: 1.There are different determinants of price elasticity of demand.Assuming that you fully understand the concept of elasticity of demand, these are the main determinants: - Other competitors in the market: If there are many.Determinants of the Price Elasticity of Supply Determinants of price elasticity of supply - Duration: 6:44.Because consumers generally have more flexibility over longer time horizons, it stands to reason that elasticity tends to be larger over longer time horizons than over shorter time horizons.

But the commodities in middle range prices are said to have an elastic demand because with the fall in the prices the middle class and the lower middle class are induced to buy that commodity and therefore the demand increases.Such as, Wheat is required in daily life and hence its demand cannot be postponed.The two determinants of price elasticity of supply are production time period and the availability of factors of production.

A key determinant of the price elasticity of supply is

Therefore, goods with more close substitutes tend to have higher elasticity of demand (i.e. are more elastic) than goods for which there are few close substitutes available.Several Uses of Commodity: The elasticity of demand also depends on the number of uses of the commodity.Learn more about determinants of price elasticity of demand in the Boundless open textbook.Thus, these are some of the important determinants of elasticity of demand that every firm should understand properly before deciding on the price of their offerings.The law of demand states that as the price decreases, the quantity demanded increases, but does not say by how much.The price elasticity of demand is commonly divided into one of five elasticity alternatives--perfectly elastic, relatively elastic, unit elastic, relatively inelastic.

To find out what is elasticity determinants, see this explanation.Lastly, the price elasticity of demand for an item is affected by the time horizon over which demand is calculated.

Price Elasticity - Southeast Missouri State University

Cost of inputs. B. Taxes and Subsidies. C. Incomes. D. All of the above. E. Both b and c.

The most important determinant of consumer spending is disposable income.

4 Most Important Determinants of Price Elasticity of Demand - Determinants of elasticity of demand

Amount of Money Spent: The elasticity of demand for a product is determined by the proportion of income spent by the individual on that product.Here the elasticity of demand of secondary (supporting) commodity depends on the elasticity of demand of the major commodity.F actors Determining Price Elasticity of Demand: T he price elasticity of demand is not the same for all commodities.

The Elasticity of Demand for Health Care - RAND Corporation

Such as the higher range products are usually bought by the rich people, and they do not care much about the change in the price and hence the demand for such higher range commodities is said to be inelastic.Select a page Accounting Banking Business — Business Statistics Economics Finance HR Marketing.Elasticity Analyze the determinants of the price elasticity of demand and determine if each of the following products are elastic or inelastic: bottled water.

"What Are The Four Determinants Of Price Elasticity And

What Are The Four Determinants Of Price Elasticity And Demand.ECON 150 BETA Site Section 01: ECON 150 BETA Site Testing Beta Site Course Introduction.It might seem like this is equivalent to saying that consumers behave more elastically when considering goods with higher prices, but this need not be the case.

List And Explain The Four Determinants Of Price Elasticity

Whereas, if the product has several uses, such as raw material coal, iron, steel, etc., then the change in their price will affect the demand for these commodities in its many uses.

Demand Elasticity -

Determinants of PRICE Elasticity of Demand: Availability of.This observation is actually closely related to the previous point- when a good is defined more broadly, there are fewer close substitutes for the good, whereas a narrowly defined good tends to have more close substitutes.Nature of Commodity: The elasticity of demand also depends on the nature of the commodity.Read this article to learn about the income elasticity of demand: concept, meaning and determinants.Consumer Income: The income of the consumer also affects the elasticity of demand.

Main Factors which Determines the Price Elasticity of

Use those determinants and your own reasoning in judging whether demand for each of the following.Existence of Substitutes: The substitutes are the goods which can be used in place of one another.

the fundamental determinant of the elasticity of demand

Price elasticity of demand - Market