Price elasticity of demand is a measure of degree of the responsiveness of the demand for a good to change in its price.

Factor affecting:

(i) Nature of goods.

(ii) Number of substitutes.

(iii) Proportion of income spent on a good.

(iv) Any other relevant factor.

Price elasticity of demand is a measure of degree of the responsiveness of the demand for a good to change in its price.

Factors effecting Elasticity of Demand:

The elasticity of demand is affected by the following factors:

(i) Nature of Commodity: Goods maybe necessaries, luxuries and comforts. Demand for necessaries (like salt) is highly inelastic; demand for luxuries (like ACs) is highly elastic; and demand for comforts (like air coolers) is moderately elastic.

(ii) Availability of Substitutes: Commodities which have substitutes, elastic demand, like tea and coffee. Commodities having no substitutes like liquor and cigarettes, etc. have inelastic demand.

(iii) Alternative Uses of a Commodity: If a commodity is used for different purpose, it has elastic demand. Example: electricity and coal.

(iv) Price Level: Higher the level of price, higher is the elasticity of demand for a commodity.

(v) Time Period: Elasticity of demand is high over a long period (compared to a short period), because during a short period of time, consumption habits tend to be stable.