Question

List and explain the four determinants of the price elasticity of demand. Give an example of a product in each category, and explain why it is either elastic or inelastic.

Answer 1

Substitutes for the product:

The proportion of expenditures on the specified right relative to income:

Product is a luxury or a necessity:

Longer the period involved in making the purchase, the more elastic

Step-by-step explanation:

The essential determinants of a product's elasticity are the accessibility of close substitutes, the measure of time a customer needs to look for alternatives, and the level of a customer's spending required buying the great.

The interest for an item is progressively flexible if there related products, if a customer has the opportunity to scan for substitutes, or if the item requires an enormous level of a purchaser's spending limit.