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The biggest factor is substitutability. That may or not be a word, but it means that a good either does or does not have a lot of substitutes. If it has a lot of substitutes (food is this way), then it will be very price elastic. For instance, if corn prices rise, people will just buy carrots. Thus, corn is elastic.
Necessity is another one, although it only applies to certain products. Take insulin for example. Diabetics NEED insulin or else they die. So they will pay whatever the market price of insulin. Thus, insulin is nearly perfectly inelastic. Other examples of this are water and illicit drugs.
Duration is the other big factor. It is how long the price stays high on a good. The longer the duration of the price increase, the higher the elasticity. For instance, if you drive through a McDonald's and find that their Big Mac has risen in price, you will buy it that time, but next time you might go to Burger King or Wendy's.
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How to use the concept of price elasticity of demand to maximize revenue?
Price elasticity of demand is a way to determine marginal revenue. Optimal revenue and, more importantly, optimal profit will occur to the point when marginal revenue = marginal cost, or the price elasticity of demand < 1.
Distinguish between price and income elasticity of demand?
distinguish between price elasticity of demand and income elasticity of demand
What are the 3 types of elasticity?
1)price elasticity of demand 2)income elasticity of demand 3)cross elasticity of demand
If the elasticity of demand is equal to one then the demand is?
Unitary elasticity is when the price elasticity of demand is exactly equal to one.
Cross elasticity of demand?
In economics , the cross elasticity of demand and cross price elasticity of demand measures the responsiveness of the quantity demand of a good to a change in the price of another good.
Significance of elasticity of demand?
Elasticity of demand will help managers determine what behaviors affect customer's buying behavior. Price elasticity will tell managers whether they can change the price of products or not.
How to use the concept of price elasticity of demand to maximize revenue?
Price elasticity of demand is a way to determine marginal revenue. Optimal revenue and, more importantly, optimal profit will occur to the point when marginal revenue = marginal cost, or the price elasticity of demand < 1.
Distinguish between price and income elasticity of demand?
distinguish between price elasticity of demand and income elasticity of demand
What are the 3 types of elasticity?
1)price elasticity of demand 2)income elasticity of demand 3)cross elasticity of demand
If the elasticity of demand is equal to one then the demand is?
Unitary elasticity is when the price elasticity of demand is exactly equal to one.
What is cross price elasticity demand?
Cross price elasticity of demand measures the responsivenss of demand for a product to a change in the price of another good.
Cross elasticity of demand?
In economics , the cross elasticity of demand and cross price elasticity of demand measures the responsiveness of the quantity demand of a good to a change in the price of another good.
Factors influencing the price elasticity of demand?
Very good answer here: http://tutor2u.net/economics/content/topics/elasticity/elastic.htm
Determinants of demand include factors that determine the amount that will be purchased at each price?
Determinants of demand include factors that determine the amount that will be purchased at each price
What is role of price elasticity of demand in business decision?
role of price elasticity of demand in managerial decisions
Distinguish between price elasticity and income elasticity?
The price elasticity refers to the change in demand due to the change in price. The income elasticity of demand on the other hand refers to the change in demand due to the change in income.
What is a true statementregarding the price elasticity of demand?
Price elasticity of demand is positively correlated with the existence of substitute goods.
