What factors affect price elasticity?
An example of an AI chatbot conversation about factors influencing price elasticity.
What factors affect price elasticity?
Price elasticity of demand is influenced by several factors, including the availability of substitutes, necessity vs luxury, and time period.
Can you explain how substitutes affect it?
Sure! If there are many substitutes available for a product, consumers can easily switch if the price rises, making demand more elastic.
What about necessities versus luxuries?
Necessities tend to have inelastic demand because people need them regardless of price, while luxuries are more elastic as they can be foregone.
How does time affect price elasticity?
Over time, consumers can adjust their behavior, making demand more elastic in the long run compared to the short run.
Are there any other factors I should know about?
Yes, factors like consumer income, brand loyalty, and the proportion of income spent on the good also play significant roles.
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