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Economic Theory

Сontinues Table 5.3

Factors Results
Possibility of If there is a possibility of postponement of consumption of a
Postponement commodity then demand will be elastic otherwise inelastic.
of Demand for certain goods can be postponed for sometime such as
Consumption computers, printers, scanners etc. People may wait till they become
cheaper. Therefore, their demand is elastic. But the demand for
food or electricity cannot be postponed. As such their demand is
inelastic.
Percentage of The elasticity of demand is also influenced by the percentage of
Income Spent income spent on the purchase of a commodity. If the percentage is
very less then the demand will be inelastic. For instance, we spend
a very less amount of our total money income on things like
agarbatties (incense sticks), matches, pens, pencils etc. If prices of
such commodities rise also, our demand is not reduced. Thus,
demand of such goods is inelastic.
Fashion Commodities, which are in fashion, will have inelastic demand.
Fashion minded people do not compromise with price. Even if price
is high, some people will demand more just because goods are in
fashion.
Change in A habitual commodity or a commodity for which consumers have
Taste developed a taste will have inelastic demand. A chain smoker
always requires a cigarette, whatever the price may be. Likewise, a
habitual paan (betel nut) chewer cannot leave his habit, in spite of
rise in price. In such cases, therefore, demand is elastic.
Price of the Very high priced or very low priced goods have low elasticity
Commodity whereas moderately priced commodities are quite high-elastic. If a
good is very expensive, demand will not increase much even if
there is little fall in its price. And demand will not increase even at
very low prices, because people have already purchased their
requirement at low prices.

The key is that it is difficult to make major changes in the short run,
because you are constrained with what can be done over a short period of
time. For example, the Hummer owner may have wanted to trade in her
Hummer for a hybrid, but there may have been significant switching costs

that prevented a reasonable trade. Her options would have been much
more flexible in the long run; for example, she could arrange to carpool to
work or move to an apartment near where she works. Such instances

highlight the fact that consumers, in general, respond much less to price
changes in the short run than in the long run.

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