Explain 4 factors that determine the elasticity of demand

Question

Explain 4 factors that determine the elasticity of demand

Answer 1

The availability of substitutes:  if there are good substitutes, you can buy something else when price goes up

Fraction of income:  if the price of shoelaces doubles, you might not care...if the price of cars double...you'll care and change your consumption decision

Necessity:  if you need the good to sustain life...like insulin, you won't care if the price changes..you'll still buy

Time:  you might need time to change habits and consumption decisions....if the price of gasoline goes up, you might be stuck buying a lot of gasoline until you can buy a smaller car or learn the bus route.  Long run elasticities are typically greater than short-run elasticities.

Answer 2

.- abundance in substitute-goods: the presence of abundance in substitute-goods make the customer let to purchase it and it will demand the substitute-goodsm More abundance means more elasticity

.- presence of barriers to quick change in prices; in some countries there is regulation for price of milk, no matter the situation of markets, the price must allignent to regulations; then no matter the demand, it is inelastic because regulations. More barriers means less elasticity.

.- Relation between demand and supply: here there is a little difficult mathematician relation to understand. In extreme cases where demand and supply are too oriented to one of them; then the elasticity is more low.

.- Relation between P/Q. it is requiered mathematical explanations to tell why,