Essay On Elasticity Of Demand

There are nine factors of elasticity of demand in the market which are nature of goods, availability of substitutes, alternative use, possibility of postponing consumption, proportion of income spent, price-level, force of habit, durability of commodities and income level.

Nature of Goods

Elasticity of demand relies on the nature of goods. The elasticity of demand for an item relies upon the necessity of it for the normal life. Some goods may be essential for life, comfort or luxurious. Essential goods are very necessary so the demand for these goods is inelastic. The consumption of luxury and comfort goods enhances human efficiency. Their consumption is not so important in their life. That’s mean is the elasticity of demand for such goods is elastic.

Availability of Substitutes

The demand for a products having perfectly substitute is comparatively more elastic. If a flood gives the same satisfaction and contentment in place of the consumption of another item, it is called a substitute item. Remote substitute has lack elastic demand and close substitute has got more elastic demand. Rice and Noodles are substitute commodities. Both can be used in absence of another. Thus the demand for Rice and Noodles is elastic.

Alternative use

That 's mean goods having alternative uses are elastic. All the uses are not the same importance. As the items are not urgent needs or use as the price to reduce their demand increase. People use those items for some urgent use in response to increase in price. For example water supply can be used for a number of purposes like wash car, wash clothes, etc. If the water supply increases people use water for some important urgent purpose and if the bills reduce people use water for a number of other not important uses. That 's the demand for water supply is