1. Nature of Commodity : Necessaries like Salt, Kerosene oil etc. have inelastic demand and luxuries have elastic demand. 2. Availability of substitutes : Demand for goods which have close substitutes is relatively more elastic and goods without close substitutes have less elastic demand. 3. Different uses : Commodities that can be put to different use have elastic demand for instance electricity has different uses. 4. Habit of the consumer : Goods to which consumers become habitual will have inelastic demand. Examples – Liquor and Cigarette.
Explain any four factors that affect price elasticity of demand.
Answers
Rajiv
1. Nature of Commodity : Necessaries like Salt, Kerosene oil etc. have inelastic demand and luxuries have elastic demand.
2. Availability of substitutes : Demand for goods which have close substitutes is relatively more elastic and goods without close substitutes have less elastic demand.
3. Different uses : Commodities that can be put to different use have elastic demand for instance electricity has different uses.
4. Habit of the consumer : Goods to which consumers become habitual will have inelastic demand.
Examples – Liquor and Cigarette.