Factors Affecting The Price Elasticity Of Demand And Cross Price Elasticity

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Introduction
In the market place, elasticity demonstrates the change to a products demand or supply quantity in response to a change in price. Price elasticity of demand demonstrates how much of a product is demanded by the consumer when the price increases or decreases. When this occurs, if the quantity demanded changes very little, this is called an inelastic good. However, if the quantify demanded shows significant change, the good is considered elastic. Price elasticity is a useful tool for business to determine pricing of their product.

Factors affecting Price Elasticity of Demand and Cross Price Elasticity

According to (Hubbard, Garnett et al. 2016) there are factors that can determine whether one product is elastic or inelastic. They
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Necessities in contrast to luxuries. Luxury goods tend to be more elastic due a non-requirement for them for everyday living over a necessity. For example, champagne may have more of an elastic demand curve as opposed to bread which may be considered a necessity for most households.
3. Market Definition. Elasticity will be higher in a more narrowly defined market as there are more substitutes available. For example if the price increased for Helga’s bread, there would be plenty of other substitutes available, thus an elastic responses. However, if the price rose for all bread types, there would be an inelastic response as there are no substitutes.
4. The amount of the good in the consumers budget. Some goods are not purchased frequently thus they have a smaller elastic demand as compared to goods that are purchased more frequently. An example of this might be fly spray that is only purchased every four months. If the price of fly spray rises, consumers won’t be too swayed off purchasing it due to the fact they purchase it so
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Some time ago, shavers would have been considered an inelastic product due to the requirement for most men to use them every day, as well as limited substitutes available. Between 2000 and 2012 there was an increase in American spending from $1.6 Billion to $2.3 Billion, and then between 2012 and 2014 it flatlined completely. Analysts have confirmed than due to the ever-increasing prices for blades, men have either given up shaving, or are switching to lower cost alternatives such as disposable razors. The availability of these cheaper alternatives, as well as the expensive cartridge shavers now becoming a luxury item demonstrate an elastic response to the purchasing of shavers. The introduction of shaving subscription services shows that as time goes by, newer substitutes become available as well as a switch from the traditional clean-cut male to a popular rise and acceptance of beards (Harwell

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