What are the Factors Determining Price Elasticity of Demand for a Good?
The price elasticity of demand for a commodity relies upon the trait of the commodity and the obtainability of close alternatives of the commodity. Contemplate, for instance, prerequisites like food. Such commodities are necessary for life, and the demands for such commodities do not change much in response to changes in their cost.
Demand for food does not change much even if the cost prices of food go up. On the other hand, demand for opulence can be very receptive to cost changes. In general, demand for prerequisites is likely to be cost price inelastic while demand for an opulence commodity is likely to be cost price elastic.
Certainly, demand for food is inelastic, the demands for specific food items are likely to be more elastic. For instance, think of a particular variety and types of pulses. If the cost price of this variety of pulses increases, people can move to some other type of pulses which is a close alternative.
The demand for a commodity is likely to be elastic if close alternatives are easily obtainable. On the other hand, if close alternatives are not obtainable easily, the demand for a commodity is likely to be inelastic.
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