Question

Explain any five factors affecting Price Elasticity of Demand.

Answer 1

Five factors affecting the elasticity of demand are:

1) Nature of commodity: Necessaries have less than unitary elastic demand whereas, luxuries have more than unitary elastic demand.

2) Time period: Demand is inelastic in short period but elastic in long period.

3) Price level: elasticity of demand will be high at higher level of the price of the commodity and low at lower level of price.

4) Diversity of uses: Commodities that can be put to variety uses have elastic demand. On the other hand, if a commodity has only few uses, its demand is likely to be less elastic.5) Habit of consumers: Goods to which consumers become habitual will have inelastic demand.