availability of close substitutes
The most important determinant of a product’s elasticity is the availability of close substitutes. If substitutes are available, customers are likely to be very responsive to changes in price.
What are the two most important determinants of price elasticity of demand?
The four factors that affect price elasticity of demand are (1) availability of substitutes, (2) if the good is a luxury or a necessity, (3) the proportion of income spent on the good, and (4) how much time has elapsed since the time the price changed.
What are the most important determinants of market demand?
In economics, there are several factors or determinants which affect the demand. Five of the most common determinants of demand are the price of the goods or service, the income of the buyers, the price of related goods, the preference of the buyer, and the population of the buyers.
What are the factors determining price elasticity of demand?
The following are the main factors which determine the price elasticity of demand for a commodity:
- The number and kinds of substitutes:
- The position of commodity in a consumer’s Budget:
- The number of uses of a commodity:
- Complementarily between goods:
- Time and elasticity:
What are the six determinants of market demand?
Section 6: Demand Determinants
- A change in buyers’ real incomes or wealth.
- Buyers’ tastes and preferences.
- The prices of related products or services.
- Buyers’ expectations of the product’s future price.
- Buyers’ expectations of their future income and wealth.
- The number of buyers (population).
Which is the most important factor in price elasticity of demand?
The Availability of Substitutes: Of all the factors determining price elasticity of demand the availability of the number and kinds of substitutes for a commodity is the most important factor. If for a commodity close substitutes are available, its demand tends to be elastic.
Which is factors are important in determining the demand?
There are, in fact, many factors that are important in determining the demand elasticity for a good or service, such as the price level, the type of good or service, the availability of a substitute, and levels of consumer incomes.
Why is demand for durable goods more elastic?
Demand for durable goods is more elastic than perishable goods (non-durable) because when the price of former increases, people either get the old one repaired or buy a second hand. 2. Range of substitutes: A commodity has elastic demand if there are close substitutes of it.
Which is an example of an inelastic demand?
(i) A necessity that has no close substitute (salt, newspaper, polish etc.) will have an inelastic demand because its consumptions cannot be postponed. Moreover, consumers purchase almost a fixed amount of a necessity per unit °f time whether the price” is somewhat higher or lower.
