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9 factors that determines the elasticity of demand

Income Elasticity of Demand

❶A substitute may be close and remote. It all depends upon circumstances of each case.

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Factors Affecting Demand Elasticity

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Elasticity of demand depends on the nature of goods. The elasticity of demand for a commodity depends upon the necessity of it for a human life. Goods may be necessary for human life, comfort or luxurious. Necessary goods are extremely essential so the demand for these goods-is inelastic.

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To determine the elasticity of the supply or demand of something, we can use this simple equation: Elasticity = (% change in quantity / % change in price) Factors Affecting Demand Elasticity.

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Demand elasticity is the sensitivity of the demand for a good or service due to a change in another factor. There are many factors that influence a change in demand elasticity. These factors. The price elasticity of demand is not the same for all commodities. It may be or low depending upon number of factor. These factors which influence price elasticity of demand, in brief, are as under.

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Factors affecting price elasticity of demand. The number of close substitutes – the more close substitutes there are in the market, the more elastic is demand because consumers find it easy to switch. The cost of switching between products – there may be costs involved in switching. Several factors affect the elasticity of a given product. Type of Product Products that customers consider essentials or necessities tend to have less elasticity than products viewed as luxury or.