Answer to Question #130562 in Microeconomics for yasir

Question

List five determinants of price elasticity of demand. How each determinant causes price elasticity of demand, explain through examples?

Answer 1

substitues for the product: better substitutes, the more elastic

-proportion of expenditures on specified good relative to income: the larger the expenditure on the specific good relative to ones budget, the more elastic

-product is a luxury or a necessity: less necessary the item the more elastic

-longer the time period involved in making the purchase, the more elastic