The price elasticity of demand for a commodity relies upon the trait of the commodity and the obtainability of close alternatives of the commodity. For example, contemplate prerequisites like food. Such commodities are necessary for life. The demands for such commodities do not change much in response to changes in their cost.
The demand for food does not change much even if the cost price of food increases. On the other hand, demand for goods can be very receptive to cost change. In general, demand for prerequisites is likely to be cost price inelastic, while demand for a commodity is likely to be cost price elastic.
Certainly, the demand for food is inelastic. The demands for specific food items are likely to be more elastic.
Example: A particular variety and types of pulses.   Â
If the cost price of this variety of pulses increases, people can move to some other type of pulses, which is a close alternative.
The demand for a commodity is likely to be elastic if close alternatives are easily obtainable. On the other hand, if close alternatives are not obtainable easily, the demand for a commodity is likely to be inelastic.
This concept was about the factors determining the price elasticity of demand for a good. To learn more about such concepts, stay tuned to BYJU’S.
Comments