Outline the factors that determine the price elasticity of demand of a product.
- Availability of substitute
- The proportion of income spent on the product
- Habit forming products e.g. cigarettes and alcohol.
- The number of uses to which a commodity can be put to convenience
- Degree of advertising
- Degree of necessity
- Consumer’s income
- The number of new purchase
- Time of the year e.g. the demand for Christmas cards in December is inelastic
- Apathy/ignorance of the availability of cheap goods elsewhere
- Convenience i.e. the demand can remain inelastic because of convenience.
- Durability i.e. durable goods like type machinery experience inelastic demand
- Joint demand i.e. goods jointly demanded then their demand is inelastic if one is already possessed e.g. car and petrol
- Inflation
- Future expectation of price increase or fall
- Possibility of postponing consumption
- how much time has elapsed since the time the price changed.
CATEGORIES Economics
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