characteristics of elasticity of demand
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Characteristics of elasticity of demand are:
1. Many substitutes. If consumers have many alternatives, demand will be more sensitive to price.
2. Competitive markets.
3. A high percentage of income.
4. Bought frequently.
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A Goods which are price elastic will tend to have some or all of the following characteristics.
Explanation:
- There are several alternatives: When customers have a variety of options, demand will be more price sensitive. People may readily move to other brands if the price of one sort of mineral water (Vittel) rises is an example.
- Markets that are competitive: In relation to the first argument, if markets are highly competitive, demand will be more price sensitive, and hence more elastic.
- A large portion of one's income: Luxury items, which account for a large amount of income, will be more price sensitive. Fewer individuals will be able to afford it if the price rises.
- Frequently purchased: Consume may be more sensitive to price fluctuations if we bread every day.
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