Question

Explain how the following factors can lead to a good having less elastic demand. (3) Give example.
i) Share in total expenditure ii) Availability of substitutes

Answer 1

Answer:

Many factors determine the demand elasticity for a product, including price levels, the type of product or service, income levels, and the availability of any potential substitutes.

High-priced products often are highly elastic because, if prices fall, consumers are likely to buy at a lower price.

There are several factors that affect how elastic (or inelastic) the price elasticity of demand is, such as the availability of substitutes, the timeframe, the share of income, whether a good is a luxury vs. a necessity, and how narrowly the market is defined.

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