factors affecting elasticity of demand
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Prepared By:- KVS, Delhi Region
FACTORS AFFECTING ELASTICITY OF DEMAND
Prepared By:- KVS, Delhi Region
DEFINITION
• It is defined as proportionate change in quantity demanded to proportionate change in price .
• Price elasticity of demand measures the responsiveness of demand of a commodity to a change in its price .
Prepared By:- KVS, Delhi Region
FACTORS AFFECTING ELASTICITY OF DEMAND
• Nature of commodity• Availability of close substitute• Number of uses• Proportion of total expenditure spent on the
product• Level of income Income of consumer• Habit• Time period
Prepared By:- KVS, Delhi Region
Nature of commodity• Necessities - Less elastic
• Comforts - Elastic
• Luxuries - More elastic
Prepared By:- KVS, Delhi Region
2) Availability of Close Substitutes
• Good having number of close substitutes will have an elastic demand
• Good with no close substitute will have an inelastic demand
Prepared By:- KVS, Delhi Region
NUMBER OF USES
• More the number of uses a commodity can be put to- More elastic is the demand and vice versa.
Prepared By:- KVS, Delhi Region
PROPORTION OF TOTAL EXPENDITURE SPENT ON A COMMODITY
Larger the proportion of total expenditure spent on a good higher will be the elasticity and vice versa.
Prepared By:- KVS, Delhi Region
LEVEL OF INCOME
• Higher the level of income, lower the elasticity of demand and vice versa.
Prepared By:- KVS, Delhi Region
HABIT
• If you are habituated to a particular good, elasticity will be less and vice versa.
Prepared By:- KVS, Delhi Region
TIME PERIOD
• During short period most of the commodities are having less elasticity of demand.
• In the long run when substitutes are available demand for the goods will become more elastic
Prepared By:- KVS, Delhi Region
Questions for self-evaluation
• What is price elasticity of demand?• Which has greater elasticity-luxuries or
necessities?• When is the demand of a commodity called
elastic? • What will be the elasticity of demand if it has
close substitutes?• Why is the demand for water inelastic?
Prepared By:- KVS, Delhi Region
Mrs. Anita Bhardwaj KV, Vigyan Vihar
Mrs .Monika Bajaj KV, Tagore Garden
Mrs. Leena Singh KV, AGCR
Mr. Sri Keshav KV, no.2 Delhi Cantt
Mrs .Ritu Tanwar KV, AFS Rajokri
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