The various factors affecting the price elasticity of demand are :
(i) Availability of substitutes: Demand for goods which have close substitutes (like tea and coffee) is relatively more elastic because, when price of such good rises, the consumers have the option of shifting to its substitute. Goods without close substitutes like cigarettes, etc., are generally found to be less elastic in demand.
(ii) Proportion of income spent on a commodity: Demand for goods on which a consumer spends only a small fraction of his total income is relatively more inelastic because, even when price of such good rises, the consumers can still afford the same units of the commodity. Goods on which a major portion of the income is spent are likely to have elastic demand.
(iii) Nature of a commodity : Ordinarily, necessaries like salt, matchboxes, etc., have less than unitary elastic demand luxuries like air conditioner, costly furniture, car etc., have greater than unitary elastic demand. Comforts like, cooler, fans, etc., have neither very elastic nor very inelastic demand. Jointly demanded goods like pen and ink, etc. shows a moderate elasticity of demand.
(iv) Tastes and Habits of the consumer : Demand for goods for which a consumer has taste preference or is habitual of is relatively more inelastic because, even when price of such good rises, the consumers will still prefer to buy the same units of the commodity.
