The elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price, price of other goods, and changes in the consumer’s income.
After going through this lesson, you will be able to understand the main factors affecting the Elasticity of Demand.
Alfred Marshall was the first economist to develop the concept of price elasticity of demand as the ratio of a relative change in quantity demanded to a relative change in price.
Factors Affecting the Elasticity of Demand
The main factors affecting the Elasticity of Demand are as follows:
| Factors | Nature of the Factor | Elasticity of Demand |
|---|---|---|
| Number of commodities | 1. Necessary items 2. Luxury items | 1. Relatively inelastic 2. Relatively elastic |
| Number of substitutes | 1. Many 2. Few | 1. Relatively elastic 2. Relatively inelastic |
| Variety of uses | 1. Many 2. Few | 1. Relatively elastic 2. Relatively inelastic |
| Income of the purchaser | 1. High-income group 2. Low-income group | 1. Relatively inelastic 2. Relatively elastic |
| The habit of the purchaser in consuming any commodity | 1. Habituated 2. Not habituated | 1. Relatively inelastic 2. Relatively elastic |
| The durability of the goods | 1. Durable 2. Non-durable | 1. Relatively inelastic 2. Relatively elastic |
| Importance of the commodity in consumer’s budget | 1. Insignificant share 2. Significant share | 1. Relatively inelastic 2. Relatively elastic |
| Possibility of postponing consumption | 1. Possible 2. Impossible | 1. Relatively elastic 2. Relatively inelastic |
| Price level | 1. High 2. Low | 1. Relatively elastic 2. Relatively inelastic |
| Time | 1. Short-run 2. Long-run | 1. Relatively inelastic 2. Relatively elastic |
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