What are the determinants of price elasticity of demand PDF?

The four factors that affect price elasticity of demand are (1) availability of substitutes, (2) if the good is a luxury or a necessity, (3) the proportion of income spent on the good, and (4) how much time has elapsed since the time the price changed. If income elasticity is positive, the good is normal.

What are the determinants of PES?

The main determinants/factors which determine the degree of price elasticity of supply are as under:

  • (i) Time period.
  • (ii) Ability to store output.
  • (iii) Factor mobility.
  • (iv) Changes in marginal cost of production.
  • (v) Excess supply.
  • (vi) Availability of infrastructure facilities.

What are the 5 factors that determine elasticity?

5 Factors which determine the Price Elasticity of Demand

  • The number and kinds of substitutes:
  • The position of commodity in a consumer’s Budget:
  • The number of uses of a commodity:
  • Complementarily between goods:
  • Time and elasticity:

When a percentage in price results in equal change in quantity supplied it is called?

When percentage change in quantity demanded is equal to the percentage change in price, the elasticity of demand is unitary elastic.

What are the three determinants of price elasticity?

The main determinants of a product’s elasticity are the availability of close substitutes, the amount of time a consumer has to search for substitutes, and the percentage of a consumer’s budget that is required to purchase the good.

What are determinants of price elasticity of demand and supply?

Many factors determine the demand elasticity for a product, including price levels, the type of product or service, income levels, and the availability of any potential substitutes. High-priced products often are highly elastic because, if prices fall, consumers are likely to buy at a lower price.

What are the determinants of price?

The main determinants that affect the price are:

  • Product Cost.
  • The Utility and Demand.
  • Extent of Competition in the market.
  • Government and Legal Regulations.
  • Pricing Objectives.
  • Marketing Methods used.

What factors determine price?

Price Determination: 6 Factors Affecting Price Determination of Product

  • Product Cost: The most important factor affecting the price of a product is its cost.
  • The Utility and Demand:
  • Extent of Competition in the Market:
  • Government and Legal Regulations:
  • Pricing Objectives:
  • Marketing Methods Used:

What are the determinants of price elasticity of supply?

There are numerous factors that impact the price elasticity of supply including the number of producers, spare capacity, ease of switching, ease of storage, length of production period, time period of training, factor mobility, and how costs react.

What factors affect elasticity of demand?

Key Takeaways

  • Many factors determine the demand elasticity for a product, including price levels, the type of product or service, income levels, and the availability of any potential substitutes.
  • High-priced products often are highly elastic because, if prices fall, consumers are likely to buy at a lower price.

What are the determinants of price elasticity demand?

5 Factors Affecting the Price Elasticity of Demand

  • Nature or type of Good. The Elasticity of Demand for a good is affected by its nature.
  • Availability of Substitutes. The Price Elasticity of Demand for a good, with a large number of substitutes available, is very high.
  • Price Level.
  • Income Levels.
  • Time Period.

What are the factors affecting elasticity of demand?

Nature of Goods: Refers to one of the most important factors of determining the price elasticity of demand. In economics goods are classified into three categories, namely, necessities (or essential goods), comforts, and luxuries.

What causes this price elasticity of demand?

The main reason for change in the elasticity of demand with change in price of some goods is the availability of their competing substitutes . The larger the number of close substitutes of a good available in the market, greater the elasticity for that good.

What products have elastic demand?

Examples of products having elastic demand are gasoline and many of its byproducts, as well as corn, wheat, and cement. The key considerations in whether a product will have elastic or inelastic demand are: Uniqueness. If there is no ready substitute for the product, it will be more price inelastic.

What is the formula for price elasticity?

The formula for price elasticity of demand is: Price Elasticity of Demand (PEoD) = (% Change in Quantity Demanded) ÷ (% Change in Price) The formula quantifies the demand for a given as the percentage change in the quantity of the good demanded divided by the percentage change in its price.