Factors Affecting the Elasticity of  Demand

 So first let's talk about what is elasticity?

An elasticity is a measure of the sensitivity of one variable to another which implies that the percentage change that will occur in one variable in response to a percentage change in another variable.

So now let's look at some of the determinants of elasticity of demand.

1. Ability to produce substitute inputs: When a substitute is available of a good, the demand for that good is tend to be more elastic. This is because it becomes easier for consumers to switch from that good to its substitutes.

2. Time: Goods tend to have more elastic demand over longer time horizons as time also influences the elasticity of demand for a commodity. Demand tends to be more elastic because in long run substitutes of a good can be available.

3. Necessity and luxuries: If a good is a necessity then it will have inelastic demand where as if it is a luxury then it will have an elastic demand. For example, Food. Consumers will continue to buy food regardless of change in price.

4. The importance of the product's cost in one's budget: If a cost of product is lower or inexpensive then consumers are relatively indifferent about the price increase. Therefore the product will have inelastic demand. The best example for this is salt.
 On the other hand if we take a product like car which is expensive ,then a little increase in the price of the car may make a difference in its demand. Hence in this case we can say say that it has elasticity of demand.