Q.Explain the important factors that determine the elasticity of demand for a commodity.

How elastic or inelastic a commodity's demand turns out to be depends on several identifiable factors.

1. Availability of substitutes. The more close substitutes a commodity has, the more elastic its demand — buyers can easily switch away when price rises.
2. Nature of the commodity. Necessities (salt, basic food grains) tend to have inelastic demand; luxuries and comforts tend to have elastic demand.
3. Proportion of income spent. Commodities that take up a small share of the consumer's budget (matchboxes, salt) tend to have inelastic demand, since a price change barely affects total spending; commodities taking a large share (housing, durables) tend to be more elastic.
4. Number of uses. A commodity usable in many different ways (electricity, steel) tends to have more elastic demand, since a price rise leads consumers to cut back on its less essential uses first while retaining the essential ones.
5. Time period. Demand is usually more elastic in the long run than the short run, since consumers need time to change habits, find substitutes, or adjust equipment. …

Naming only 'availability of substitutes' and stopping there — a complete answer for BIEAP Intermediate Economics exams needs several factors, since questions of thi …