Price elasticity of demand illustrates how the quantity demanded of a good is affected by the change in price of that good. The determinants of price elasticity of demand are the availability of substitutes, size, durability and time.Know More
The number of available substitutes is a key determinant of price elasticity of demand. The more substitutes a good has, the greater price elasticity of demand it has. A seller of a good with many substitutes has less ability to raise the price because consumers will switch to a lower priced substitute. Brand loyalty decreases when the number of substitute goods increases.
The size of the expenditure also affects price elasticity of demand. A low-priced good has less price elasticity because the price is such a small percentage of a consumer's income. For example, a change in the price of nails will have less effect than a change in the price of cars.
Durability affects price elasticity of demand of a good because consumers continue to use older goods when sellers raise the price of new goods. Perishable goods do not offer consumers the option of using older goods.
Time is the final determinant of price elasticity of demand. In the short run, consumers continue purchasing the same amount of a good when the price rises. However, as more time passes, consumers adjust their purchasing behavior.Learn more about Economics
Investopedia defines price elasticity of demand as a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. The price elasticity of demand is equal to the percent change in quantity demanded divided by the percent change in price.Full Answer >
Elastic demand, also known as the price elasticity of demand, describes the price sensitivity of a particular good. When a product has elastic demand, a percentage change in price is followed by a larger, inverse percentage change in the quantity demanded. Inelastic demand is the opposite of elastic demand.Full Answer >
The basic factors affecting demand economics are the quantity of a good or service consumers are willing to purchase and the price of the good or service. Other factors that influence demand economics include the price of complementary goods needed along with the good or service in question, the disposable income of the consumer, personal tastes and preferences, and expectations about future price fluctuations.Full Answer >
A change in price for a particular good is the most common factor that would not shift the demand curve for beef, explains Tutor2U. In contrast, things that do influence the demand curve for items, such as beef, include: population, change in consumers' incomes or change in tastes and preferences.Full Answer >