Factors affecting Elasticity of Demand: -
(1) Substitutes: - When substitutes of any goods is available then demand elasticity of such goods is highly elastic, because when price of these goods increases, substitutes are used in place of it. In the same way, on decrease in price of these goods, use of substitutes decreases. Tea, coffee, gur, sugar etc. are examples of substitutes.
(2) Alternative Uses: - When goods could be used in only one way, its demand will be elastic. For example, cool has many uses – It can be used in railways, houses industries, etc. Demand of cool for railway is inelastic but for house purpose, its demand is elastic as many cheaper alternative goods like, cooking gas etc. could be used in place of it.
(3) Postponement of Consumption : - If consumption of any goods can be postponed, its demand becomes elastic, e.g., a person has two woolen clothes. If due to some reason, price of woolens clothes increases, then consumer postpones the idea of buying another sweater in current year. In such a case, demand of woolen clothes for current year will be highly elastic.
(4) Expenditure Amount :**-** Goods on which large part of income is spent, are highly demand elastic and those goods on which small part of income is spent, their demand is generally in elastic. That is why, demand of television, radio cycle, scooter , etc. is more elastic as compare to salt, wheat etc.
(5) Income Level: - Elastic of demand for rich people is generally in elastic because increase in price level does not affect them severely while elasticity of demand for poor people is highly elastic because increase in prices affect their purchasing power a lot.
(6) Price level: - Elasticity of demand also depends on price level of the goods. Elasticity of demand will be greater at high price level and less of low level of price.
(7) Time Period : - In short run, demand for goods is generally less elastic because a consumer changes his habits in long-run and but not in shortrun more over, supply of output cannot be increased readily in Short run.
(8) *** Demand or complementary of Goods: -** Few goods are demanded along with other goods. These are called completementary goods and their demand is inelastic. For example, scooter-petro), shoes- socks, etc.
