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Factors Influencing Elasticity of Demand:

Nature of Commodity - By the nature of commodity, we divide them into comfort, luxuryand necessity. For luxuries and comforts .When prices of these commodities decrease, the

demand for these commodities will also increase ,whereas in case of necessities, the price of the commodities decrease, the demand for these commodities will increase by less thanproportionate. For example if prices of salt increases there will not be decrease in theconsumption .

Availability of substitutes For those commodities which have enough substitutes in themarket, the price elasticity is of more than one, because when the price of a commodity hasmany substitutes, the consumer will shift to the substitute available in the market.

Number of Uses Those commodities which have many or multiple uses like coal, milk. Forsuch commodities, the elasticity is more than one as they can be used for more than onepurpose. So, if the price of such commodity decreases, there will be increase in the demand.But for those commodities which have very less use of limited uses, the demand will berelatively inelastic.

Durability of commodity Durable goods is those which last for many years. E.g.:motorcycle, TV, washing machines, etc. The price elasticity of demand for durable goodswill be more than one because when the price of such commodities increases, the demandwill increase, but for the commodities like fish, vegetables etc., which come under perishable

goods, the elasticity of demand will be less than one as these commodities cannot be stored.So even if the price decreases, the demand will not increase....

Elastic demand is a type of demand that will rise or fall depending on the price of the good. Forexample, candy bars are an elastic demand . If the price of candy is around $1, most people will buythe candy and it will be high in demand. However, if that same candy bar's price rose up to $4, mostpeople would not buy the candy.

Inelastic demand is the opposite. People will buy goods with an inelastic demand no matter what theprice is. A good example of this would be gas. People complain and complain about gas prices , yetthey still buy it because they need it, even if it $3 a gallon. Another example would be life-savingmedications. Even if they are expensive, people will still buy them or else they could possibly die.

So basically the elastic demand for a good will rise or fall depening on the price where as an inelasticdemand for a good won't.

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Elasticity of demandPrice elasticity of demand

Price elasticity of demand measures the percentage change in quantity demanded caused by

a percent change in price. As such, it measures the extent of movement along the demand

curve. This elasticity is almost always negative and is usually expressed in terms of absolute

value (i.e. as positive numbers) since the negative can be assumed. In these terms, then, if

the elasticity is greater than 1 demand is said to be elastic; between zero and one demand is

inelastic and if it equals one, demand is unit-elastic. A perfectly elastic demand curve is

horizontal (with an elasticity of infinity) whereas a perfectly inelastic demand curve is vertical

(with an elasticity of 0).Income elasticity of demand

Income elasticity of demand measures the percentage change in demand caused by a percentchange in income. A change in income causes the demand curve to shift reflecting the change in

demand. IED is a measurement of how far the curve shifts horizontally along the X-axis. Income

elasticity can be used to classify goods as normal or inferior. With a normal good demand varies in

the same direction as income. With an inferior good demand and income move in opposite directions.Cross price elasticity of demand

Cross price elasticity of demand measures the percentage change in demand for a particular good

caused by a percent change in the price of another good. Goods can be complements, substitutes or

unrelated. A change in the price of a related good causes the demand curve to shift reflecting a

change in demand for the original good. Cross price elasticity is a measurement of how far, and in

which direction, the curve shifts horizontally along the x-axis.Cross elasticity of demand between firms

Cross elasticity of demand for firms, sometimes referred to as conjectural variation, is a measure of

the interdependence between firms. It captures the extent to which one firm reacts to changes in

strategic variables (price, quantity, location, advertising, etc.) made by other firms.