What are the factors affecting price elasticity of demand

1.	What are the factors affecting price elasticity of demand
Answer» Factors Affecting Price Elasticity of Demand\xa01. Availability of substitutesp—A commodity with more and close substitutes tends to have an elastic demand and one with a few weak substitutes has an inelastic demand.For example:\xa0If price of Pepsi falls, a large number of consumers will switch over the Pepsi from Coke. On the other hand when the price of milk increases, the quantity demanded will not decrease much and vice versa.\xa02. Proportion of Income Spent—Smaller is the proportion of Income spent on a commodity, the smaller will be the elasticity of demand and vice-versa.\xa0For example:\xa0The demand for soap, salt, matches, etc. is highly inelastic since the consumer spends a very small proportion of his income on them.\xa03. Habits of the consumer—Price elasticity of demand depends also upon whether or not the consumers are habitual of using a commodity. If consumers are habitual of consuming some commodities, they will continue to consume these even at higher prices. The demand for such commodities will be usually inelastic.\xa04. Time Factor—Price Elasticity is generally low for the short period as compared to long period. This is for 2 reasons—\xa0Firstly—It takes time for consumers to adjust their tastes, preferences and habits. Secondly, new substitutes may be developed in the long run.\xa0

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