O Level Economics Factors affecting the price elasticity of demand


Factors affecting the price elasticity of demand





1.Availability of close substituted

Goods which  have  close  substitutes  such as  ovatine  an  Nescafé have  elastic demand  whereas goods  which  have  no close  substitutes  such  as  salt  has  inelastic demand  . commodities  are said  to be in close  substitutes  when  they  are within the same  price range  and use  for the  same purpose 





2.Degree of necessity

Goods which are basic needs  or  necessity  such  as  foods and clothes have an inelastic  demand  whereas  goods  which  are not basic  necessity  have elastic demand  .it  a commodity  is a basic  necessity but has  a close  substitutes , the demand  will be  elastic






Those  who  cultivate  the habit of  consuming  particular commodity  have inelastic  demand  for those good , for example  smoking and drinking  whereas  those who  don’t have the habit  of  consuming g  particular  goods  such as cigarettes and  alcohol have  elastic   demand  for these goods




4.Consumer’s  income

Consumers n who  have  a  high  income  generally  have an  inelastic demand  for goods  especially  essential  goods  . this  is because  their   expenditure  on these  goods takes  a smaller  proportion  of their  income   and change  in prices do not  affect  them . On the  other hand  , the demand  for goods  by  low income  earners  is always  elastic  . this is so because  a slight increase    in prices  of goods  would  reduce their demand  for the goods .





5.proportions of consumer income  spent  on the  commodity 

When a large  proportion  of a  consumer  income  is spent  on a  good , its  demand   for that  good  will  be elastic  .this  is so because  change  in the price  of the  commodity  will affect  the consumer  . On the other  hand  , when  the  proportion  of income  spent on a good  is smaller the demand  for  it  will be  inelastic  .this  is so  because  a change  in price  will not  affect  the  quantity  bought  significantly for example  salt and matches





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