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Elasticity of DemandElasticity of Demand
The degree to which price effects demand
Inelastic DemandInelastic Demand
Demand that is not very sensitive to a change in price
Elastic DemandElastic Demand
Demand that is very sensitive to a change in price
Factors That Effect DemandFactors That Effect Demand
1) Availability of Substitutes Is there a lack of substitutes or a wide
choice of substitutes?2) Relative Importance How much of your budget do you spend on
the good? The higher the jump in price, the more you will have to adjust your purchases.
Factors That Effect DemandFactors That Effect Demand
3) Necessities Versus Luxuries
Is the good a need or a want?
4) Change over Time
Consumers need time to react to a price change and change their spending habits.
Demand tends to become more elastic over time