Q.State with reasons whether you agree or disagree with the following statement:
Elasticity of demand depends upon several factors.

Agree — price elasticity of demand varies from good to good because it depends on factors like the nature of the good, availability of substitutes, its uses, the share of income spent on it, habits, postponement of purchase, price level and time.

Factors determining elasticity of demand

1. Nature of the commodity — necessities (salt, medicine) have inelastic demand, while comforts and luxuries have relatively elastic demand.

2. Availability of substitutes — goods with many close substitutes (tea/coffee, brands of soap) have highly elastic demand; goods with no substitutes have inelastic demand.

3. Number of uses — a commodity that can be put to many uses (electricity, coal) has more elastic demand.

4. Proportion of income spent — goods on which a small fraction of income is spent (matchboxes, salt) have inelastic demand; goods taking a large share of income have elastic demand.

5. Habits of the consumer — goods a person is habituated to (tobacco to a smoker) have inelastic demand.

6. Postponement of consumption — if a purchase can be postponed (a car, furniture), demand is elastic; if it cannot (medicine), demand is inelastic.

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