Explain the factors influencing elasticity of demand?
Question: Explain the factors influencing elasticity of demand?
The elasticity of demand refers to the degree of responsiveness of the quantity demanded of a product to changes in its price. The following are some of the factors that can influence the elasticity of demand:
Availability of substitutes: If there are many substitutes available for a product, consumers may switch to these substitutes if the price of the product increases, making the demand for the product more elastic.
Proportion of income spent: If a large portion of a consumer's income is spent on a product, they are likely to be more sensitive to price changes, making the demand for the product more elastic.
Necessity: If a product is a necessity or has no close substitutes, consumers may continue to purchase it even if the price increases, making the demand for the product less elastic.
Time: Over time, consumers may adjust their consumption patterns or find alternatives, making the demand for the product more elastic in the long run than in the short run.
Brand loyalty: If consumers are highly loyal to a particular brand or product, they may be less sensitive to price changes, making the demand for the product less elastic.
Overall, the elasticity of demand is influenced by a variety of factors related to consumer behavior, product characteristics, and market conditions.
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