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Price elasticity of demand

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Determinants of Elasticity of Demand

What Are the Major Determinants of Price Elasticity of Demand?
What Is Price Elasticity?
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Definition: The Elasticity of Demand is a measure of sensitiveness of demand to the change in the price of the commodity. Determinants of Elasticity of Demand Apart from the price, there are sever Apart from price, there are several factors that influence the elasticity of demand.

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Price elasticity of demand has four determinants: product necessity, how many substitutes for the product there are, how large a percentage of income the product costs, and how frequently its purchased, according to Economics Help.

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If the factors of production can be easily moved from one use to another, it will affect elasticity of supply. The higher the mobility of factors, the greater is the elasticity of supply of the good and vice versa. (iv) Changes in marginal cost of production. Determinants of Price Elasticity of Supply A numeric value that measures the elasticity of a good when the price changes.-availability of materials - The limited availability of raw materials could limit the amount of a product that can be produced.

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Determinants of Price Elasticity of Demand. Various factors influence the price elasticity of demand. Here are some of them: 1. Substitution Effect: If a product can be easily substituted, its demand is elastic, like Gap's jeans. If a product cannot be substituted easily, its demand is inelastic, like gasoline. 2. The three elasticity determinants--availability of substitutes, time period of analysis, and proportion of budget--affect, or determine, the values of the price elasticities of demand and supply. The key to these determinants is the ability to respond to price changes. If buyers and sellers can respond more easily, then the respective demand.