i. Nature of Goods:

Refers to one of the many vital factors of determining the price elasticity of demand.

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In economics goods are classified right into 3 categories, namely, necessities (or important goods), comforts, and also luxuries.

Usually, the demand L necessary items, such as salt, sugar, match boxes, and soap, is relatively inelastic (less than unity) or perfectly inelastic.


This implies that consumers purchase the exact same quantity of these products, regardmuch less of increase or decrease in their prices. Furthermore, the consumption of necessities cannot be postponed; therefore, the demand for necessities is inelastic. On the various other hand also, price elasticity of demand also for luxury products, such as auto, air conditioners, and expensive jewellery, is very elastic.

Any change in the prices of deluxe products cause a major a readjust in their demand. In enhancement, the price elasticity of demand for comforts, such as milk fan, and coolers, is equal to unity. As such, we deserve to say that demand also for comforts is even more elastic as compared to necessities and much less elastic than deluxe items. However before, this statement is not constantly true as the demand also for luxury goods may be elastic in lower and also medium revenue groups, yet deserve to be inelastic in top course.

Apart from this, items are likewise grouped right into resilient and also perishable products. Durable items, such as furniture auto, and also computer system, are the goods that can be offered variety of times, while perishable products, including eatables and also cold drinks, have a solitary usage. The price elasticity of demand for sturdy goods is even more elastic as compared to perishable products. The is bereason when the price of sturdy products increases, consumers choose to get the old ones repaired or replace them via pre-supplied ones.

ii. Availcapacity of Substitutes:

Influences the elasticity of demand to a larger degree. The major reason for adjust in the elasticity of demand through change in price of some items is the availcapability of their completing substitutes. The larger the number of close substitutes of an excellent obtainable in the market, greater the elasticity for that good. For instance, tea and coffee are close substitutes.


If the price of tea rises, consumers may curtail the intake of tea and also purchase coffee and versa. In such a instance the demand for tea decreases, while demand also for coffee rises. Therefore, the elasticity of demand for both of these products would certainly be higher. However before, the demand also for goods that execute not have actually cshed substitutes, such as liquor, is inelastic, irrespective of increase or decrease in its price.

iii. Number of Uses of a Good:

Helps in determining the price elasticity of a great. The demand for multi-use goods is more elastic as compared to single-usage items. When the price of a multi-usage good decreases, consumers would rise its usage. As such, the percentage adjust in the demand also for multi-use products is more with respect to percentage change in their prices.

For example, electricity have the right to be offered for a number of objectives, such as lighting, food preparation, and also miscellaneous commercial and also commercial functions. If the price of electrical power decreases, consumers might rise its consumption for assorted various other purposes.

Similarly, if the price of milk decreases, consumers may rise its intake by making use of it for miscellaneous purposes, such as making curd, butter, cream, and also ghee. In such a situation, the demand for milk would be highly elastic. On the contrary, if the price for these products increases, tbelow usage would be restricted to immediate purposes only.

iv. Distribution of Income:

Acts as an important variable in influencing the price elasticity of demand. If a customer has high earnings, then the demand for products consumed by him/her would be inelastic. For example, a boost in prices of any type of product would not affect the demand for assets consumed by a millionaire.

On the various other hand also, demand also for commodities consumed by reduced or middle income consumers would be highly sensitive to adjust in the price. For instance, if the price of smart phones rises, then the demand for mobile phones would certainly be inelastic in high earnings team, whereas it would be extremely elastic in reduced and also middle earnings group consumers.

v. Level of Price:

Refers to the reality that demand for high-priced goods, such as expensive gold and also diamond jewellery and also imported cars, is inelastic. The adjust in the price of these products produces a very small adjust in their demand. Similarly, the demand also for low-priced products, such as cheap potatoes and match boxes, is also inelastic.

This is due to the truth that consumers have actually currently purchased these items in sample quantities; therefore, adjust in the price of these items reasons a tiny readjust in their demand. In the words of Marshall, “Elasticity of demand is excellent for high prices, and also great or at least significant for tool prices, but it declines as the price falls, and also progressively fades away if the loss goes so much that satiety level is reached.”


Acomponent from this, the demand for medium-priced items that are neither incredibly costly nor incredibly low price is elastic. The demand for medium-priced products is incredibly sensitive to adjust in their prices.

vi. Propercentage of Total Expenditure:

Refers to another crucial element that determines the price elasticity of demand. If a consumer spends a huge percent of his/her income to purchase a details product, then the demand also for that product would certainly be elastic. On the contrary, the demand would be inelastic for products which are purchased after spfinishing a little percentage of consumers’ earnings.

For example, products, such as salt, newspaper, toothpaste, matchboxes, pens, and also books, entitle a tiny portion of consumer’s revenue. The demand for these products is typically inelastic as boost in the price of these items does not have major impact on consumer’s budgain. Because of this, consumers proceed to purchase the exact same quantity of these products even in instance of boost in their prices.

vii. Time Factor:

Implies that the price elasticity of demand also mostly relies on time that consumers require to change themselves through new prices of a product. The longer the period of time, better the price elasticity of demand also. This is because of the reality that over a period of time, consumers obtain adjusted to change in prices or new prices.

For instance, if the price of petrol decreases, then it would certainly not bring about prompt rise in its demand till consumers have actually purchasing power to buy vehicles. However, over a period of time, consumers could be able to adjust their expenditure and also consumption fads, so that they deserve to purchase vehicles spurred by fall in the prices of petrol. Thus, we can say that loss in the price of commodities, would expand their demand in the long run.

viii. Complementary Goods:

Refer to the fact that the demand also for complementary items is fairly inelastic. The complementary items, pen and ink and car and also petrol, are consumed jointly. Therefore, the climb in price of one great would not impact its demand, until tright here is readjust in the price of its complementary great. For instance, if the price of petrol rises, then its demand also would not contract immediately till the price of car boosts.

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ix. Possibility of Postponement:

Implies that items whose demand can be postponed by consumers to a near future, then the demand would be extremely elastic. For instance, purchasing a vehicle and also renovating a building have the right to be postponed; therefore, their demand is very elastic. On the various other hand, if the demand also for a details product cannot be postponed, then its demand would certainly be inelastic. For instance, demand also for drugs is inelastic.


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