Factors Affecting Price Elasticity Of Demand Essay

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Thus for rich people the demand for Horlicks is inelastic whereas for poor people the demand for the Horlicks is elastic.

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One of the factors that affect the PED is the substitutes and complementary product that a good/service has.

And cross-price elasticity of demand measures the responsiveness of demand for good X following a change in the price of a related good Y.

However, the extent to which a price change impacts the demand differs widely from produce to product.

PED=(change in quantity demanded)/(change in price). If this value is bigger than one, the product is said to be price elastic (price sensitive), whereby a change in price will lead to a greater than proportionate change in quantity demanded.Durable commodity is used over a long period of time.The utility of a durable good is destroyed continuously.These three will be explained individually in order in the following paragraphs.Price elasticity of demand is a measure of the responsiveness of change in quantity demanded of a good/service to a change in price, ceteris paribus.This is not an example of the work produced by our Essay Writing Service.You can view samples of our professional work here.The demand for those goods on which a negligible amount of the total income of the consumer is spent is said to be inelastic. Price-level: The demand for high priced commodities is elastic.Salt, edible oil, match box, soap etc account for a very negligible amount of the consumer income. On the other hand the low priced goods is said to have inelastic demand.Once a durable good is bought the buyer feels no want of it for a long period of time.Thus the change (rise or fall) in price can’t influence the demand. On the other hand less durable or perishable goods are consumed repeatedly. Thus the demand for perishable goods is less elastic. Income level: Elasticity of demand depends on income level.


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