Factors affecting price elasticity

Factors Affecting Price Elasticity of Demand

a)      Percentage of Income Spent on the commodity

A consumer is expected to be more responsive to a change in the cost of a good on which he spends a larger percentage of his income for instance car than to the similar change in the cost of a good on which he spends the small percentage of his income such as salt

b)      Availability of Substitutes

If a good has number of substitutes, a consumer can switch to an alternative commodity if its price rises.

c)      The Number of Uses for a commodity

The demand for a commodity with several uses will tend to be much more elastic than its demand for any other particular use.

d)     Time Period

The longer the time period, the more will be the elasticity of demand.

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