Factors Affecting Price Elasticity Of Demand Essay

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These three will be explained individually in order in the following paragraphs.

Price elasticity of demand is a measure of the responsiveness of change in quantity demanded of a good/service to a change in price, ceteris paribus.

Durable commodity is used over a long period of time.

The utility of a durable good is destroyed continuously.

However, the extent to which a price change impacts the demand differs widely from produce to product.

PED=(change in quantity demanded)/(change in price). If this value is bigger than one, the product is said to be price elastic (price sensitive), whereby a change in price will lead to a greater than proportionate change in quantity demanded.

Once a durable good is bought the buyer feels no want of it for a long period of time.

Thus the change (rise or fall) in price can’t influence the demand. On the other hand less durable or perishable goods are consumed repeatedly. Thus the demand for perishable goods is less elastic. Income level: Elasticity of demand depends on income level.

The rich and the poor are not equally affected at the change in price. Because of high income rich people buy the same amount of an expensive commodity in response to a rise in price.

For example with a rise in price of Horlicks, poor people by other milk powder relatively cheaper than Horlicks.


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