FACTORS INFLUENCING ELASTICITY OF DEMAND

The elasticity of demand refers to the degree of change in quantity demanded due to a change in the price of the commodity.

Factors influencing the elasticity of demand are

1)  Nature of commodities: The nature of commodities can be classified as luxury, necessary, and comfort goods. Luxury goods like diamonds, cars, etc have elastic demand. Necessary goods like food grains, medicine, etc have inelastic demand. Comfort goods like furniture, clothes, etc have elastic demand.

2)  Availability of substitute: if the commodity has a substitute then demand will be elastic. If there is no substitute then demand for a commodity will be inelastic.

3)  Habits: habit-making goods like alcohol, music, and addictive goods have inelastic demand.

4)  Durability: demand for durable goods like furniture, fridge, washing machine, etc have elastic demand. Whereas perishable goods like fruits, vegetables, milk, etc whose product life is less have inelastic demand.

5)  Urgency of goods: if goods are urgently needed then they will have inelastic demand, for example, medicines, food, etc. If goods are less urgently needed then they have elastic demand, like diamonds, cars, etc

6)  Complementary goods: complementary goods are those goods that are demanded together like television and remote. Demand for complementary goods is inelastic.

7)  Number of uses: if goods have many uses then demand for those commodities is elastic. If goods have single-use then demand for those commodities will be inelastic.