Factors affecting the PED / Determinants of PED
Availability of Substitutes: The availability of substitutes for a product or service affects the PED. If there are many substitutes available, consumers are more likely to switch to alternatives if the price of the product or service increases, making demand more elastic.
Proportion of Income Spent: The proportion of income spent on a product or service affects the PED. Products or services that represent a significant proportion of consumers' income tend to have a more elastic demand, as consumers are more sensitive to changes in price.
Necessity of the Product: The necessity of a product or service affects the PED. Products or services that are necessary for consumers tend to have a less elastic demand, as consumers may be willing to pay a higher price to obtain them.
Time: The length of time available to consumers to adjust their consumption in response to a change in price affects the PED. In the short term, demand tends to be less elastic, as consumers may not have the time to adjust their consumption patterns. In the long term, demand tends to be more elastic, as consumers have more time to find substitutes or adjust their behavior.
Brand Loyalty: The degree of brand loyalty among consumers affects the PED. Consumers who are loyal to a particular brand tend to have a less elastic demand, as they may be willing to pay a higher price for the brand they prefer.
Scope of the Market: The scope of the market, including the number of buyers and sellers, affects the PED. In markets with many buyers and sellers, demand tends to be more elastic, as consumers have more options and can easily switch to alternatives if the price changes. In markets with few buyers and sellers, demand tends to be less elastic, as consumers have fewer options and may be more willing to pay a higher price.