Question

What do you mean by price elasticity of demand? Explain factors determining the price elasticity of demand.

Answer 1

Price elasticity of demand may be defined as the percentage change in quality demanded to the percentage change in price.

Factors determining the price elasticity of demand:

a) Nature of the commodity

b) Availability of substitutes 

c) Different uses of goods 

d) Habits of the consumers 

e) Income groups or income level 

f) Postponement of thr use of goods 

g) Proportion of income spent on a good 

h) Price level 

i) Distribution of income in society 

j) Time period 

k) Joint demand

 

 

 

 

 

 

 

The elasticity of demand measures the responsiveness of the quantity demanded of a good to change in its price, price of other goods and change in consumer's income.