What are the 5 factors that determine elasticity?
5 Factors Affecting the Price Elasticity of Demand
- Nature or type of Good. The Elasticity of Demand for a good is affected by its nature.
- Availability of Substitutes. The Price Elasticity of Demand for a good, with a large number of substitutes available, is very high.
- Price Level.
- Income Levels.
- Time Period.
What are the 4 determinants of price elasticity of supply?
The main determinants/factors which determine the degree of price elasticity of supply are as under:
- (i) Time period.
- (ii) Ability to store output.
- (iii) Factor mobility.
- (iv) Changes in marginal cost of production.
- (v) Excess supply.
- (vi) Availability of infrastructure facilities.
What are the determinants of elasticity?
Many factors determine the demand elasticity for a product, including price levels, the type of product or service, income levels, and the availability of any potential substitutes. High-priced products often are highly elastic because, if prices fall, consumers are likely to buy at a lower price.
What are the factors affecting elasticity?
Various factors which affect the elasticity of demand of a commodity are:
- Nature of commodity:
- Availability of substitutes:
- Income Level:
- Level of price:
- Postponement of Consumption:
- Number of Uses:
- Share in Total Expenditure:
- Time Period:
What is a key determinant of price elasticity of supply?
A key determinant of the price elasticity of supply is the amount of time that has passed since the price changed. When the price of a product increases, suppliers are unable to completely react to the higher prices by supplying more. As a result, the quantity supplied is much higher in the long run.
How do you respond to price elasticity?
If demand is inelastic, price and total revenue are directly related, so increasing price increases total revenue. If demand is elastic, price and total revenue are inversely related, so increasing price decreases total revenue.
What are the three major determinants of own price elasticity?
The three determinants of price elasticity of demand are:
- The availability of close substitutes.
- The importance of the product’s cost in one’s budget.
- The period of time under consideration.
What factors affect price elasticity of supply?
There are numerous factors that impact the price elasticity of supply including the number of producers, spare capacity, ease of switching, ease of storage, length of production period, time period of training, factor mobility, and how costs react.
How do you calculate elasticity?
Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is computed as the percentage change in quantity demanded (or supplied) divided by the percentage change in price.
What are the determinants of the price elasticity of demand?
Consumer Income: The income of the consumer also affects the elasticity of demand. For high-income groups, the demand is said to be less elastic as the rise or fall in the price will not have much effect on the demand for a product. Whereas, in case of the low-income groups, the demand is said to be elastic and rise and fall in…
Which is the most important determinant of elasticity?
The main determinants of a product’s elasticity are the availability of close substitutes, the amount of time a consumer has to search for substitutes, and the percentage of a consumer’s budget that is required to purchase the good.
How does the elasticity of demand depend on complementary goods?
Joint Demand: The elasticity of demand also depends on the complementary goods, the goods which are used jointly. Such as car and petrol, pen and ink, etc. Here the elasticity of demand of secondary (supporting) commodity depends on the elasticity of demand of the major commodity.
Which is more elastic demand or inelastic demand?
The demand for the Comfort Goods is neither elastic nor inelastic. As with the rise and fall in their prices, the demand decreases or increases moderately. Whereas the demand for the luxury goods is said to be highly elastic because even with a slight change in its price the demand changes significantly.