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Section 3: Determinants of Price Elasticity of Demand

Determinants of Elasticity of Demand

❶You must be logged in to post a comment. This measure of elasticity is sometimes referred to as the own-price elasticity of demand for a good, i.

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What Is Price Elasticity?
What Are the Major Determinants of Price Elasticity of Demand?

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Definition: The Elasticity of Demand is a measure of sensitiveness of demand to the change in the price of the commodity. Determinants of Elasticity of Demand Apart from the price, there are sever.

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A: Price elasticity of demand has four determinants: product necessity, how many substitutes for the product there are, how large a percentage of income the product costs, and how frequently its purchased, according to Economics Help. By using these determinants, businesses can estimate how a change in the price affects demand.

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The price elasticity of demand (PED) is a measure that captures the responsiveness of a good’s quantity demanded to a change in its price. More specifically, it is the percentage change in quantity demanded in response to a one percent change in price when all other determinants of demand are held constant. This opening module of the Power of Markets course covers the basic assumptions about market participants made by economists, the concept of opportunity cost, and the key determinants of supply and demand. We will then learn how to use the supply-demand framework to explain and predict market.

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Start studying Four Determinants of Price Elasticity of Demand. Learn vocabulary, terms, and more with flashcards, games, and other study tools. The three determinants of price elasticity of demand are: 1. The availability of close substitutes. If a product has many close substitutes, for example, fast food, then people tend to react strongly to a price increase of one firm’s fast food. Thus, the price elasticity of demand of this firm’s product is high.