i. Nature of Goods:

Refers to one of the many important determinants of identify the price elasticity that demand.

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In business economics goods space classified into three categories, namely, necessities (or necessary goods), comforts, and also luxuries.

Generally, the need L vital goods, such as salt, sugar, match boxes, and also soap, is fairly inelastic (less than unity) or perfectly inelastic.


This means that consumers purchase the same amount of these goods, nevertheless of boost or decrease in their prices. Moreover, the usage of necessities cannot be postponed; therefore, the need for necessities is inelastic. On the various other hand, price elasticity of demand for deluxe goods, such as car, air conditioners, and also expensive jewellery, is very elastic.

Any adjust in the price of deluxe goods reason a significant a readjust in your demand. In addition, the price elasticity of need for comforts, such together milk fan, and coolers, is same to unity. Therefore, we can say that demand for comforts is an ext elastic as compared to necessities and also less elastic than luxury goods. However, this statement is not always true together the need for luxury items may be elastic in lower and medium revenue groups, however can be inelastic in top class.

Apart native this, items are additionally grouped right into durable and perishable goods. Durable goods, such as furniture car, and computer, space the items that can be used variety of times, while perishable goods, including eatables and cold drinks, have actually a solitary use. The price elasticity of need for resilient goods is more elastic as contrasted to perishable goods. The is due to the fact that when the price of durable goods increases, consumers prefer to get the old ones repaired or change them through pre-used ones.

ii. Availability of Substitutes:

Influences the elasticity of demand to a bigger extent. The main reason for change in the elasticity of need with change in price that some products is the accessibility of their completing substitutes. The larger the variety of close substitutes the a good available in the market, higher the elasticity for that good. For example, tea and also coffee room close substitutes.


If the price the tea rises, consumers may curtail the consumption of tea and also purchase coffee and also versa. In together a instance the need for tea decreases, while demand for coffee increases. Therefore, the elasticity of demand for both the these products would be higher. However, the need for products that do not have close substitutes, such together liquor, is inelastic, regardless of of rise or decrease in that is price.

iii. Number of Uses that a Good:

Helps in determining the price elasticity of a good. The need for multi-use goods is more elastic as contrasted to single-use goods. When the price of a multi-use good decreases, consumers would increase its consumption. Therefore, the percentage readjust in the need for multi-use items is more with respect to percentage readjust in your prices.

For example, electricity can be supplied for a variety of purposes, such together lighting, cooking, and various commercial and industrial purposes. If the price of electrical power decreases, consumers may boost its consumption for various other purposes.

Similarly, if the price of milk decreases, consumers may increase its intake by using it for various purposes, such together making curd, butter, cream, and ghee. In such a case, the need for milk would certainly be highly elastic. ~ above the contrary, if the price for these items increases, there usage would be minimal to urgent purposes only.

iv. Distribution of Income:

Acts as a critical factor in influencing the price elasticity that demand. If a consumer has high income, then the need for products consumed through him/her would be inelastic. Because that example, boost in price of any product would not impact the demand for assets consumed by a millionaire.

On the other hand, need for commodities consumed by lower or middle income consumers would certainly be highly sensitive to change in the price. For example, if the price of mobile phones increases, then the need for mobile phones would be inelastic in high revenue group, conversely, it would certainly be extremely elastic in lower and middle income group consumers.

v. Level the Price:

Refers to the reality that need for high-priced goods, such together expensive gold and also diamond jewellery and imported cars, is inelastic. The change in the price that these items produces a very small change in your demand. Similarly, the demand for low-priced goods, such together cheap potatoes and also match boxes, is also inelastic.

This is as result of the fact that consumers have already purchased these items in sample quantities; therefore, readjust in the price of this goods causes a tiny change in their demand. In the indigenous of Marshall, “Elasticity of demand is an excellent for high prices, and an excellent or at least considerable for tool prices, but it decreases as the price falls, and gradually fades far if the autumn goes so much that satiety level is reached.”


Apart indigenous this, the need for medium-priced goods that space neither very costly nor really low expense is elastic. The demand for medium-priced products is very sensitive to readjust in your prices.

vi. Relationship of total Expenditure:

Refers to an additional important variable that determines the price elasticity the demand. If a customer spends a large portion the his/her income to purchase a specific product, then the demand for that product would be elastic. ~ above the contrary, the need would it is in inelastic for products which are purchased after ~ spending a small portion of consumers’ income.

For example, goods, such as salt, newspaper, toothpaste, matchboxes, pens, and also books, entitle a small section of consumer’s income. The need for these products is normally inelastic as rise in the price of these items does not have major impact ~ above consumer’s budget. Therefore, consumers proceed to purchase the same quantity of this goods also in case of boost in their prices.

vii. Time Factor:

Implies the the price elasticity of demand largely relies on time that consumers take to adjust themselves with brand-new prices the a product. The much longer the period of time, greater the price elasticity of demand. This is due to the truth that over a duration of time, consumer get readjusted to readjust in price or new prices.

For example, if the price the petrol decreases, then it would certainly not result in immediate increase in its demand until consumers have actually purchasing power to purchase vehicles. However, over a period of time, consumers can be may be to readjust their expenditure and consumption patterns, so the they have the right to purchase vehicles spurred by autumn in the prices of petrol. Therefore, we have the right to say that autumn in the price of products, would broaden their demand in the long run.

viii. Security Goods:

Refer come the reality that the demand for complementary products is fairly inelastic. The security goods, pen and ink and also car and also petrol, room consumed jointly. Therefore, the rise in price that one great would not influence its demand, until there is readjust in the price that its security good. Because that example, if the price of petrol rises, climate its need would not contract instantly until the price of auto increases.

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ix. Opportunity of Postponement:

Implies that goods whose demand can be postponed by consumer to a close to future, climate the need would be highly elastic. For example, purchasing a car and also renovating a building can it is in postponed; therefore, their demand is very elastic. On the various other hand, if the need for a specific product cannot be postponed, climate its demand would it is in inelastic. Because that example, demand for medicines is inelastic.


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