Many factors determine the demand elasticity for a product, including
price levels, the type of product or service, income levels, and the availability of any potential substitutes
. High-priced products often are highly elastic because, if prices fall, consumers are likely to buy at a lower price.
What factors affect elasticity of demand quizlet?
What are the factors that affect elasticity of demand and how does it each affect elasticity?
Substitutes, proportion of income, and necessities versus luxuries
.
What are the factors affecting the price elasticity of demand?
The four factors that affect price elasticity of demand are
(1) availability of substitutes
, (2) if the good is a luxury or a necessity, (3) the proportion of income spent on the good, and (4) how much time has elapsed since the time the price changed. If income elasticity is positive, the good is normal.
What are two factors that affect elasticity?
There are several factors that affect how elastic (or inelastic) the price elasticity of demand is, such as
the availability of substitutes, the timeframe, the share of income
, whether a good is a luxury vs. a necessity, and how narrowly the market is defined.
What are the four factors that affect the elasticity of supply?
There are numerous factors that impact the price elasticity of supply including the
number of producers, spare capacity, ease of switching, ease of storage, length of production period, time period of training, factor mobility, and how costs react
.
What is an example of price elastic?
Another example of an elastic product is
a Porsche sports car
. Because a Porsche is typically such a large portion of someone’s income, if the price of a Porsche increases in price, demand will likely be elastic. There are also alternatives, such as Jaguar or Aston Martin.
What is meant by elasticity of demand?
Elasticity of demand is an important variation on the concept of demand. …
If the formula creates an absolute value greater than 1, the demand is elastic
. In other words, quantity changes faster than price. If the value is less than 1, demand is inelastic. In other words, quantity changes slower than price.
Which factors does not affect elasticity of demand?
1. c.
the cost of producing the product
will not affect the elasticity of demand for a product.
What is elasticity demand example?
An example of products with an elastic demand is
consumer durables
. These are items that are purchased infrequently, like a washing machine or an automobile, and can be postponed if price rises. For example, automobile rebates have been very successful in increasing automobile sales by reducing price.
How does Elasticity of demand relate to revenue?
For goods with elastic demand,
firms should lower prices to increase total revenue by increasing the quantity demanded
. For goods with inelastic demand, firms should increase price to raise total revenue.
Why are luxury goods elastic?
For example, luxury goods have a
high price elasticity of demand because they are sensitive to price changes
. … A good or service may be a luxury item, a necessity, or a comfort to a consumer. When a good or service is a luxury or a comfort good, the demand is highly price-elastic when compared to a necessary good.
What are the 4 types of elasticity?
Four types of elasticity are
demand elasticity, income elasticity, cross elasticity, and price elasticity
.
What is cross price elasticity?
Also called cross-price elasticity of demand, this measurement is
calculated by taking the percentage change in the quantity demanded of one good and dividing it by the percentage change in the price of the other good
.
What factors increase supply?
Supply refers to the quantity of a good that the producer plans to sell in the market. Supply will be determined by factors such as price,
the number of suppliers
, the state of technology, government subsidies, weather conditions and the availability of workers to produce the good.
What is an example of perfectly elastic supply?
If supply is perfectly elastic, it means that
any change in price will result in an infinite amount of change in quantity
. Suppose that you baked delicious cookies and your costs, including inputs and time, were $3 per cookie. At $3, you would be willing to sell as many cookies as you could.
What is elasticity of demand and supply?
The price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price. The price elasticity of supply is
the percentage change in quantity supplied divided by the percentage change in price
.
