There are several key factors that affect the elasticity of demand for a commodity: 1) The availability of substitutes - the more close substitutes that are available, the more elastic the demand will be as consumers can easily switch to alternatives if prices rise. 2) The nature of the commodity - demand for luxury goods is more elastic than for necessities since people need necessities regardless of price. 3) The percentage of income spent on a commodity - the more of their income people spend on something, the more sensitive they will be to price changes in elastic terms. 4) Time - elasticity depends on how quickly consumers can adjust their consumption in response to price changes over time.

1. FACTORS
AFFECTING
ELASTICITY OF
DEMAND
By,
ALPHY VARGHESE

2. AVAILABILITY OF SUBSTITUTES
• One of the most determinants of elasticity of
demand for a commodity is the availability
of its close substitute.
• Higher the degree of closeness of substitutes
the greater the elasticity of demand in a
commodity.
• Eg. Tea and Coffee

3. NATURE OF COMMODITY
• Commodities can be grouped as
luxuries, comforts and necessities.
• Demand of luxury good is more elastic
than the demand of necessities and
comforts.

4. WEITAGE IN TOTAL CONSUMPTION
• Another factor that influences the elasticity
of demand is the proportion of income
which consumer spend on a particular
commodity.
• If he spend more income on a commodity,
its demand will be more elastic.
• Eg. Salt, Pen etc.

5. TIME FACTOR IN ADJUSTMENT
OF CONSUMPTION FACTORS
• Elasticity of demand depends also on the
time consumers need to adjust their
consumption pattern to a new price; the
longer the time available, the greater the
price elasticity.

6. • If the price of TV is decreases, demand will
not increase immediately unless people
posses excess purchasing power. But over a
time, people may be able to adjust their
expenditure pattern. So that they can buy a
TV set at a lower price.

7. RANGE OF COMMODITY USE
• The range of use of commodity also
influence the elasticity of demand. The
wider the range of the use of a product,
the higher the elasticity of demand for the
decrease in price.
• Eg. Milk

8. CHANGE IN FASHION
• Fashion are subject to changes. If a
particular commodity goes out of fashion,
demand may decrease even if the price is
lowered. On the other hand, if some other
commodities turns to be a fashionable
product, its demand will increase even if
the price is raised a little.

9. Thank you