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Determinants of Elasticity of Demand

What Is Price Elasticity?

❶If the price of a commodity having several uses is very high, its demand will be small and it will be put to the most important uses and if the price of such a commodity falls it will be put to less important uses also and consequently its quantity demanded will rise significantly. Note that the vertical difference between supply curve S1 and supply curve S2 is 50 cents the increase in the cost of supplying the gasoline.

What Are the Major Determinants of Price Elasticity of Demand?

Determinants of Elasticity of Demand
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Definition: The Elasticity of Demand is a measure of sensitiveness of demand to the change in the price of the commodity. Determinants of Elasticity of Demand Apart from the price, there are sever.

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A: Price elasticity of demand has four determinants: product necessity, how many substitutes for the product there are, how large a percentage of income the product costs, and how frequently its purchased, according to Economics Help. By using these determinants, businesses can estimate how a change in the price affects demand.

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The price elasticity of demand (PED) is a measure that captures the responsiveness of a good’s quantity demanded to a change in its price. More specifically, it is the percentage change in quantity demanded in response to a one percent change in price when all other determinants of demand are held constant. This opening module of the Power of Markets course covers the basic assumptions about market participants made by economists, the concept of opportunity cost, and the key determinants of supply and demand. We will then learn how to use the supply-demand framework to explain and predict market.

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Start studying Four Determinants of Price Elasticity of Demand. Learn vocabulary, terms, and more with flashcards, games, and other study tools. The three determinants of price elasticity of demand are: 1. The availability of close substitutes. If a product has many close substitutes, for example, fast food, then people tend to react strongly to a price increase of one firm’s fast food. Thus, the price elasticity of demand of this firm’s product is high.