DETERMINANT OF THE PRICE ELASTICITY OF DEMAND

As we have mentioned about the laws of demand earlier now we are going discuss about the determinant of the price elasticity. Earlier we knew how  with the increase of the product of the price the quantity of the product decreases. The price elasticity of demand generally deals with how the customers are not willing to buy the product with the increase of the price of the product.Elastic generally deals with the increase of the price of the product the quantity decreases whereas in inelastic we will find that with the increase of the price of the product the quantity does not decreases.
1.) Replacing by close substitute
we will see that when the two items are of same and one of the item is having some rise in pricing then we will find that the quantity of that product will eventually decrease.
eg:Imagine the pricing of butter and curd are same. So if the price of butter increases then we will find that the people will be buy more of the substitute of that of butter.
2.)Necessity against luxuries
Suppose let us consider that the price of buying water increases but we will find that people will be buying that. In case of luxuries we will see that the same people will be buying fruit juice but with the rise of the price of fruit juice the customer will hesitate to buy. The earlier example is necessity and the later example is luxury.