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
3.Habit
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