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Factors affecting price elasticity of demand

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Factors affecting price elasticity of demand are:
1. Number of close substitutes within the market - The more (and closer) substitutes available in the market the more elastic demand will be in response to a change in price.
2 Specific nature of Good - Necessities tend to have a more inelastic demand curve, whereas luxury goods and services tend to be more elastic.

3. Percentage of income spent on a good - It may be the case that the smaller the proportion of income spent taken up with purchasing the good or service the more inelastic demand ...

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Response discusses the Factors affecting price elasticity of demand

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Factors that affect price-, income-, and cross-elasticity of demand

Select a product and discuss factors that affect its price, income, and cross elasticity of demand.

For example, if you select table salt, you could argue that since its price is low relative to income and it is generally considered a necessity, it has very inelastic price elasticity of demand. It has low or close to zero income elasticity of demand because people do not tend to consume more of it as income rises. The cross elasticity of demand between salt and salt substitutes would be positive because the products are substitutes. Foods that typically are used with salt would be complements, and they would have negative cross elasticity of demand.

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