What are the factors affecting the price elasticity of demand?

1) The availability of substitutes: The greater the number of substitutes, the more elastic the good. As consumers can easily switch to consuming other goods if the price of one good rises.

2)The degree of necessity: If a good is a necessity, consumers will be more willing to pay higher prices for that good. Making the demand more inelastic for good consumers deem to be a necessity. An example of this is the demand for oil.

3)Time period considered: Goods tend to be more elastic over the long run because consumers have more time to adjust their behavoir.

4)Proportion of the purchaser's budget consumed by the item: Goods that represent a large portion of the purchaser's budget tend to have greater elasticity.

Answered by Emmanuel A. Economics tutor

15476 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

Please show, using a diagram with explanation, the effect on the UK market for t-shirts of a flood in Bangladesh, a leading cotton growing nation.


Explain why income tax in the UK is an example of progressive taxation.


Explain the term Economies of Scale. You may use a diagram to help.


Explain one possible effect on the equilibrium market price of an increase in production costs for firms


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2024

Terms & Conditions|Privacy Policy