Question

Explain how each of the Determinants of Price Elasticity of Demand would or would not affect your demand for alcohol

Answer 1

Determinants of Price elasticity of demand :

(1) Availability of close substitutes : Because there are no close substitutes of alcohol . Therefore, as price of alcohol changes , demand for alcohol does not change by much.

(2) Number of uses: Because alcohol has limited uses , Therefore, as a price of alcohol increases demand for this does not decrease by much.

(3) Proportion of income spend on the good : Alcohol contains the less proportion of income of the consumer. Therefore, as the price of alcohol increases , they do not decrease their demand by much amount.

(4) Habits: The goods for which consumers are addicted has the relatively price inelastic. Alcohol is the good for which consumers are addicted. Therefore, as the price of this good increases, demand for alcohol won't affected by much.

(5) Price of the good: smaller the price of a good, the lesser the price elasticity of demand. Because alcohol has the small price, therefore, as the price of this increases , demand won't be affected by much.

All the determinants of price elasticity of demand for alcohol implies the relatively inelastic demand for alcohol. This implies that demand for alcohol would not affected much.