Determinants of Elasticity of Demand

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4 Terms

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  1. Percentage of the buyers budget spent on the good

  • Greater % = More elastic is your demand

  • Lesser % = Less elastic is your demand

2
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  1. Number of available substitutes for the good

  • The larger the number of available substitutes = the more elastic is your demand

  • The lesser the number of available substitutes = the less elastic is your demand

  • Availability of alternatives constrains the ability of the seller to raise the price

3
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  1. (really a subcategory of 2 to be honest) Time:

  • The greater the amount of time that buyers have to adjust to a price change, the more elastic is the demand (more time to find substitutes)

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