What factors influence a change in demand elasticity? By Mary Hall Updated January 17, — 9:
The demand changes as a result of changes in price, other factors determining it being held constant. We shall explain below in detail how these other factors determine market demand for a commodity.
These other factors determine the position or level of demand curve of a commodity. It may be noted that when there is a change in these non-price factors, the whole curve shifts rightward or leftward as the case may be.
The following factors determine market demand for a commodity. Tastes and Preferences of the Consumers: An important factor which determines the demand for a good is the tastes and preferences of the consumers for it.
The changes in demand for various goods occur due to the changes in fashion and also due to the pressure of advertisements by the manufacturers and sellers of different products.
Income of the People: The demand for goods also depends upon the incomes of the people.
The greater the incomes of the people, the greater will be their demand for goods. In drawing the demand schedule or the demand curve for a good we take income of the people as given and constant.
When as a result of the rise in the income of the people, the demand increases, the whole of the demand curve shifts upward and vice versa. The greater income means the greater purchasing power.
Therefore, when incomes of the people increase, they can afford to buy more. It is because of this reason that increase in income has a positive effect on the demand for a good. When the incomes of the people fall, they would demand less of a good and as a result the demand curve will shift downward.
For instance, as a result of economic growth in India the incomes of the people have greatly increased owing to the large investment expenditure on the development schemes by the Government and the private sector.
As a result of this increase in incomes, the demand for good grains and other consumer goods has greatly increased. Likewise, when because of drought in a year the agriculture production greatly falls, the incomes of the farmers decline. As a result of the decline in incomes of the farmers, they will demand less of the cotton cloth and other manufactured products.
Changes in Prices of the Related Goods: The demand for a good is also affected by the prices of other goods, especially those which are related to it as substitutes or complements. When we draw the demand schedule or the demand curve for a good we take the prices of the related goods as remaining constant.
Therefore, when the prices of the related goods, substitutes or complements, change, the whole demand curve would change its position; it will shift upward or downward as the case may be.
When the price of a substitute for a good falls, the demand for that good will decline and when the price of the substitute rises, the demand for that good will increase.
For example, when price of tea and incomes of the people remain the same but the price of coffee falls, the consumers would demand less of tea than before.There are three main factors that influence a good’s price elasticity of demand: 1. Availability of Substitutes In general, the more good substitutes there are, the more elastic the demand will be.
There are 4 factors that influence the price elasticity of demand: the availability of substitutes, the specific nature of the good, the part of income spent on the good, and the time you have to buy the good.
Elasticity of demand is an economics concept that relates to the relative change in quantity demanded that's associated with a price change for a product. There are 4 factors that influence the price elasticity of demand: The availability of substitutes - The specific nature of the good - The part of income spent on the good - The time consumers have to buy the good Choose a.
When demand changes due to the factors other than price, there is a shift in the whole demand curve. As mentioned above, apart from price, demand for a commodity is determined by incomes of the consumers, his tastes and .
There are 4 factors that influence the price elasticity of demand: The availability of substitutes - The specific nature of the good - The part of income spent on the good - .