“Determinants of Price Elasticity of Demand”

 Number of Determinants

 The more substitutes a good has, the higher the price elasticity of
demand will be.
 The Fewer substitutes a good has, the lower the price elasticity of
demand will be.

*(more broadly defined = lesser substitutes)

*(more narrowly defined = more substitutes)

 Necessities versus Luxuries

 More that a good is considered a luxury rather than a necessity, the

higher the price of elasticity of demand will be.

 Percentage of One’s Budget Spent on the Good

 The greater the percentage of one’s budget that goes to purchase a good,
the higher the PED will be.
 The smaller percentage of one’s budget that goes to purchase a good, the
lower the PED will be.

 Time

 Price Elasticity of demand of a good is higher in the long run than in the
short run.