What are the factors that influence demand inelasticity?

Answer 1

Demand inelasticity with regard to price means that the quantity demanded of a product or service varies little even as the price varies greatly. This may happen, for example, when the product or service is relatively essential, when there are few if any substitutes or complements, or when the price, however much it varies, is an inconseqential amount compared to the income of the consumer. Technology can also affect the amount demanded. It is also necessary to define the use of the product. For example, electricity as a product is used for heating homes, air conditioning, watching television, and running a computer. Though the product is physically the same (flow of electrons) for all purposes, the demand is not similarly elastic for all uses. Electricity used for heating in a cold climate may be rather essential, but there are usually alternatives such as oil, propane, wood, gas, etc. It requires large quantities of electricity for this task, so it is often a large part of the household budget, and there are technological options (heat pumps vs. resistance baseboard heat) and readily available complements (insulation and storm windows), for example. The quantity of electricity demanded for heating, therefore should be rather elastic over the long run. Televisions and computers use relatively a lot less electricity, there is no substitute, the cost is not great relative to the typical household's income, so the quantity demanded of electricity for these purposes should not vary greatly as the price varies.