DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : K.DORASWAMY
Designation : Lecturer in CCP
Institute : Govt. Poly. for Women, Kakinada
Semester : V Semester
Subject : Business Economics
Subject Code : CCP-502
Duration : 50minutes
Major topic : Consumer Behaviour
Sub Topic : Factors influencing Elasticity of
Demand contd
Teaching Aids : PowerPoint, Animations
CCP502.18 1
Objectives
On completion of this period, you would be able to

 Explain the various factors influencing Elasticity of

Demand

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RECAP

Factors influencing elasticity of demand

 variety of uses of a commodity
 substitutes
 postponement of demand
 amount spent

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Durable goods
 The demand for durable goods is inelastic
 When the price rises people may prefer to get the
old things repaired than buy new things

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Habits-inelastic demand

 If the consumers are addicted to a particular

commodity due to habit and customs.
 The demand for the commodity will be inelastic.

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Range of prices
 Generally demand will be inelastic at the high
range of prices and at the low range of prices.
 When the prices of a commodity is very high, a
little fall in the price does not increase the
demand very much.

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 When the price is at a very low range - further fall
does not increase the demand very much because
all those who wanted to buy the commodity would
have purchased.

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Joint demand

 In the case of jointly demanded goods the fall in

the price of one commodity only does not increase
its demand very much.
 Both pen and ink are necessary for writing. If the
price of ink falls with the price of pens high, the
demand of ink does not increase much.

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Time factor in elasticity
 Time plays a very important part in
determining elasticity of demand.
 Elasticity will be less in the short period and
more in the long period for the following
reasons.
a) changes in habits, consumptions, etc.
b) It will take some time for consumers to know
the fall in price.

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a) It may take sometime to adjust to new
commodities.
b) It may take sometime for the prices of
complementary goods to fall.
c) If the people think that the prices will still fall more,
demand may not increase immediately.

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 New substitutes for a commodity may be found out
in the long period.
 By the above reasons elasticity in the short period
differs from elasticity in the long period.

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Income group
 For the same commodity, the demand of the poor
may be elastic while the demand of the rich
people may be inelastic.

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Frequency of purchase

 If the consumers purchase the commodity very

frequently the demand will be elastic.
 Because the buy less when the price rises and buy
more when the price falls.
 If the consumers purchase the commodity now and
then, the demand may be inelastic.
 Because the response of demand for price
changes will be less.

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Urgency of demand

 If the demand for the commodity is urgent, it will

not be possible to reduce the demand even if the
price rises.
 Therefore the demand will be less elastic.
 The urgency will be much more, if there are no
substitutes for the product.

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Summary
We have so far discussed:
Various factors affecting the elasticity of
demand
 Durable Goods
 Habits
 Range of Prices
 Joint Demand
 Time Factor
 Income Group
 Urgency & Frequency of Purchase

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Quiz
 Elasticity of demand
a) Measure the size.
b) Strength of demand
c) The degree of responsiveness for a
commodity to a fall in its price
d) Stretching the product.

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Frequently Asked Questions

1. Explain how the following factors affect the

elasticity of Demand
 Durable Goods
 Habits
 Joint Demand
 Time Factor
 Income Group
 Urgency & Frequency of Purchase

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Thank you

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