Chapter III

Demand Analysis

Dr. GOPALAKRISHNA B.V.

Faculty in MBA,
SDM, Mangalore
 In the ordinary parlance demand means desire or
willingness for a commodity.
 But in Economics terminology demand backed up by
enough money to pay for the goods demanded. Demand
is the Desire or want backed up by money.
 Therefore, demand means desire backed by the
willingness to buy a commodity and the purchasing
power to pay.
 Harvey – demand in economics is the desire to posses
something & the willingness & ability to pay a certain
price in order to possess it”.
 Stonier & Hague – demand in economics means
demand backed up by enough money to pay for the good
demanded”.
 Benham – “demand for a thing at a given price is the
amount of it which will be bought per unit of time at that
price”.
1. Demand is a desire or want backed up by
money – desire + purchasing power
2. Demand is always related to price and time
– it is an relative concept.
 Demand for a commodity should always
have a reference to price and time.
 Example – demand for grapes by a
household at a price of Rs 10/kgs or 20 kgs/
per week.
1. Demand may be viewed Ex-Ante or Ex-post
 Ex-ante means intended demand
 Ex-post – what is already purchased.
 Demand has the following four
characteristics
1. Price – demand is always related to price. It is
meaningless to say that the demand for
refrigerator in the market is one thousand. The
person must state the price at which the
consumer is prepared to purchase the said
quantity of the commodity.
2. Time – demand always means demand per unit of
time, per day, per week, per month or per year.
3. Market – demand is always related to the market.
Market here simply refers to the contact between
buyers and sellers. There is no need for definite
geographical area.
4. Amount – demand is always a specific quantity
which a consumer is willing to purchase. It is not
 Law of Demand
• The law of demand is one of the fundamental
laws of economics.
• The law of demand states that the demand for
a commodity increases when its price
decreases and falls when its price rises, other
things remaining constant.
• The law of demand – states, there is an inverse
relationship between the price and quantity of
demand.
• The law holds under the condition (based on
assumption) i.e., other things remain constant
 Law of demand is based on certain
assumptions

1. There is no changes in consumers’ taste and

preferences.
2. Consumer’s Income remain constant
3. Price of other goods should not be change
(prices of substitutes and complementary
goods)
4. There should be no substitute for the
commodity.
5. The commodity should not confer any
distinction.
6. The demand for the commodity should be
continuous.
7. No changes in weather condition
 Law of Demand…….
• These factors remain constant only in
the Short Run – in the long run they
tend to change.
• The law of demand is based on the
Law of Diminishing Marginal
Utility . It can be illustrated through
a demand schedule, a demand curve
and a demand function.
• Demand Schedule is a table or statement
showing how much of a commodity is
demanded in a particular market at
different prices.
• Alfred Marshall was the first economist
developed the techniques of price theory –
it is a list of price and quantities.
• A Demand Schedule may be
– 1. Individual Demand Schedule
– 2. Market Demand Schedule
 Demand scheduled is a list of quantities
of a commodity purchased by a consumer
at different prices

Demand Schedule

Individual Demand Schedule Market Demand Schedule

Individual Demand –
• refers to the demand for a commodity from the individual
point of view – a family, household or person.
• Individual demand is a single consuming entity’s demand
D = f (P).
Market Demand –
• Refers to the total demand of all the buyers taken
together.
• Market demand is an aggregate of the quantities of
product demanded by all the individual buyers at a give
price.
• How much quantity the consumers in
general would buy at a given period of
time.
• Market demand is more important from the
business point of view – sales depend on
the market demand – business policy and
planning are base on the market demand
– price are determined on the basis of
market demand.
Dx = f (Px, Py, M, T, A, U)
 Dx = f (Px, Py, M, T, A, U)
Dx = Quantity demanded for commodity x
f = functional relationship
Px = Price of commodity x
Py = Prices of related commodities
M = The money income of the
consumer
T = the taste of the consumers
A = the advertisement effect
U = unknown variable
 Individual Demand Schedule

Table. 1 Demand for Oranges by Individual

A

Price of
Oranges (Rs) 10 9 8 7 6
Quantity
demanded of 1 3 7 11 13
oranges
(dozen)
 Table 2. Market Demand Schedule for
orange
Price of Quantity demanded of Market
Oranges Oranges by consumers Demand or
(Rs. Per (dozens) Oranges
dozen (dozens)
A B C D

10 1 0 3 0 4
9 3 1 6 4 14
8 7 2 9 7 25
7 11 4 12 10 37
6 13 6 14 12 45
Horizontal Summation: From
Individual to Market Demand
Why does the demand curve slope
downwards
• Demand curves slope downwards
from left to right.
• This is because of the inverse
relationship between the price
and quantity demanded.
• But the question is why do people
demand more if prices come down ?
• This is because of the following
reasons -
A downward sloping
demand curve
• A demand curve must look like
this, i.e., be negatively sloped.

price

demand

quantity demanded
 Reasons for downward sloping
demand curve from left right
1. The operation of law of diminishing
marginal utility.
2. Substitution effect.
3. Income effect
4. New consumers enter to market
5. Several uses/multiple uses
6. Psychological effects
1. The operation of law of diminishing marginal
utility
 The law of demand is based on the law of
diminishing marginal utility.
 If consumer’s uses more and more units of a
commodity the utility derived from each and
successive units goes on decreasing.
 It means as the price of the commodity falls
consumer purchases more of the commodity and
hence his marginal utility will diminishes.
2. Substitution effect
 Substitution effect also leads to the demand curve
to slope downwards from left to right.
 As the price of a commodity falls, prices of its
substitute goods remains the same and consumer
will buy more of that commodities.
3. Income effect
 The fall in the price of a commodity is equivalent to an
increase in the income of the consumer.
 After falling prices, - he has spend less money for
purchasing the same amount of commodity as before.
 A part of this money can be used for purchasing some
more units of that commodity.
 Similarly, if the price increases, the consumer’s income
effect reduced and he has to curtail his expenditure on
the commodity.
4. New consumers
 When the price of commodities falls new consumer can
enter into market.
 For example computer sets, laptops, mobile,
refrigerators, washing machines etc – falling prices even
the poor people can also buying these goods.
5. Several uses
 Some commodities can be put to several
uses which lead to downward slope of the
demand curve.
 When the price of such commodities goes
up they will be used for important
purposes.
 When price falls, the commodities will be
uses for various purpose – For example
electricity/power
6. Psychological effects
 When the price of a commodity falls,
people favour to buy more which is natural
& psychological entity.
 Therefore, the demand increases with the
fall in prices.
 Exception to the Law of Demand
• Law of demand is only a general statement
telling that prices and quantities of a
commodities are inversely related.
• There are certain peculiar cases – law of
demand will not hold good.
• Certain cases with the increases in price
quantity demand also increases and with the
fall in price quantity demand also falls.
• In such a case demand curves slopes upward
from left to right.
• Robert Giffen was the first person to expose
this rare occasion, which is known as Giffen
Paradox.
 Y
D

P2
Prices of Commodities

P1

O Q1 Q2 X
Quantity of Demanded
Factors influences on exception to
the law of demand
1. Prestige goods (Veblen effects).
2. Giffen effects or Paradox.
3. Speculative goods.
4. Scarcity and Inflation.
5. Ignorance of the people
6. Demand for necessaries
7. War or emergency
 1. Prestige Goods
• Articles of prestige value Snob appeal or
articles of conspicous consumption – only by
rich people – costlier price – diamond, gold etc.
• Veblen in his doctrine of conspicuous consumption
and hence this effect is called Veblen Effect.
• When prices of such goods rise, their snob appeal
increases and they are purchase in larger
quantities.
• On the other hand, as the price of Veblen goods
falls, their capacity to perform the function of
ostentation diminishes.
 2. Speculative goods
 in the speculative market, particularly in stocks
and shares, more will be demanded when the
prices are rising and less will be demanded when
the price declines.
 People tend to buy more shares, bond &
debentures when their prices are rising in the
hope that making profits in future and they can
reduces buying prices are falling.
3. Giffen Effect or Giffen Paradox
 Robert Giffen is an Irish economist of 19th century
– discovered Giffen Paradox.
 People were so poor that they spent a major part
of their income on Potatoes and a small part on
meat. When the price of potatoes rose, they had
to economise on meat even to maintain the same
consumption of potatoes.
4. Demand for Necessaries
 The law of demand does not apply in the case of
necessaries of life – food, clothing and shelter
 Irrespective of price changes, people have to
consume the minimum quantities of necessary
commodities.
5. Scarcity and Inflation
 The law of demand cannot apply in the case of
acute scarcity/shortage of commodities.
 People buying more out of panicky when prices
are rising.
 Even at the time of hyper-inflationary situation
people will try to purchase more commodities
even there is higher prices of commodities.
6. Consumer’s ignorance
 Sometimes, people buy more of a
commodities at a higher price out of
sheer of ignorance.
7. War or emergency
 During the period of war, if there is fear
of shortage, people may start buying for
hoarding & building stocks even at
higher prices.
 On the other hand, if there is
depression, they will buy less at low
prices.
 Changes in Demand curve

Changes in demand curve takes place in two ways –

1. Extension and Contraction demand
2. Increase and decrease demand
1. Extension and contraction demand
 A movement along a demand curve takes place
when there is a change in the quantity
demanded due to change in the commodity’s
own price and not due to any other factor.
2. Increase and decrease demand
 When demand changes due to changes in other
factors such as tastes & preferences, income of
consumers, prices of the related good
(substitutes and complementary) etc – it is
called as increase & decrease demand
1. Extension and contraction
demand
 A movement along a demand curve takes place
when there is a change in the quantity demanded
due to change in the commodity’s own price and
not due to any other factor.

Y
D

P2
Contraction demand
Prices

P
P1 Expansion demand
D

O M2 M M1
Quantity Demanded X
 When the price of the commodity is
OP, the quantity demanded is OM.
 If the price of the good falls from OP
to OP1 quantity demanded increases
from OM to OM1 is called as expansion
demanded.
 While, on the other hand, when the
price of good rises from OP to OP2
quantity demand decreases from OM
to OM2, thus situation is called as
contraction demand.
 2. Increased and decreased demand
 When demand changes due to changes in other
factors such as tastes & preferences, income of
consumers, prices of the related good
(substitutes and complementary) etc – it is called
as increased & decreased demand.
 Due to changes in other factors, if the consumers
buy more goods it is called increased demand.
 On the other hand, if the consumers buy less
goods it is called decreased demand
 Figure. 2
Figure. 1
Y Y
D1 D
D
D1

A B B A
P P
Price

D
D1 D1
D

O Q Q1 X Q1 Q X
O
Quantity of Demanded
Increased Demand
Decreased Demand
 Figure 1 – original demand curve is DD,
the price is OP and quantity demanded is
OQ.
 Due to change in the conditions of demand
(income, taste & price of substitute &
complementary) the quantity demand
increases from OQ to OQ1 – this is called as
increased demand.
 Figure. 2 - Where OP is the original price
of OP and the OQ is the quantity demand.
Due to fall in (other factors) quantity
demand decreases to OQ1 – this situation is
called as decreased demand.
 Determinants of demand
 Demand may change not only
because of a change in price but also
due to other factors.
 These factors such as tastes & habits
of the people, income of the
consumers, weather conditions, size
of population & substitution goods
etc are leads to changes in demand (
non-price factors) either rightward or
leftward directions.
Factors determines the demand for a
commodities are –
1. Price of the commodity
2. Income of the consumers
3. Tastes & preferences of the consumers
4. Prices of related goods
5. Advertisement & sales propaganda
6. Consumers expectations
7. Changes in size of population
8. Changes in weather condition
9. Prosperity and depression
10.Distribution of income and wealth
1. Price of the Commodity
• There is a close relationship between the
quantity demanded and the price of the
product.
• Normally a larger quantity is demanded at a
lower price and vice-versa.
• There is inverse relationship between the
price and quantity demanded.
2. Income of the Consumer
• The ability to buy/purchasing power a
commodity depends upon the income of the
consumer.
• When the income of the consumers
increases, they buy more and when income
falls they buy less.
3. Tastes and Preferences of the Consumers
• The demand for a product depends upon tastes and preferences of
the consumers.
• Demand for several products like ice-cream, chocolates, beverages
and so on depends on individual’s tastes.
• People with different tastes and habits have different preferences
for different goods.
• A Strict Vegetarian – no demand for meat at any price.
• Non-Vegetarian – liking chicken even at high price.
• Smokers and Non-smokers.
 4. Prices of Related Goods
• Related goods are generally substitutes and
complementary goods.
• The demand for a product is also influenced by the
prices of substitutes and complements.
• Substitute commodities – examples – Tea and
Coffee, Jower and Bajra, Pear and Beans, Ground nut
and Til-oil.
• Demand for a commodity depends on the relative
price of substitutes.
• Complementary goods – satisfy one wants – two
or three goods are needed in combination – Joint
Demand
• Example Car and Petrol, Pen and Ink, Tea, Sugar
and Milk, Shoes and socks, Sarees and Blouse, Gun
and Bullets etc
5.Advertisement and Sales Propaganda
• In modern time, the preferences of consumers can be
altered by advertisement and sales propaganda.
• Advertisement helps in increasing demand by
informing the potential consumers.
• Advertisement are given in various means such as
news papers, radio, television.
6. Consumer Expectations
• Changes in future expectation are also influence to
changes in demand.
• If consumer expects as rise in prices he may buy
large quantities of that commodity and vice versa.
• Expectation of rising income – tend to increase his
current consumption.
 7. The Growth of Population
• The growth of population is also
another important fact that affects the
market demand.
• When population increases demand
also increases irrespective of the price
level.
• Similarly, composition of population of
population also brings about change in
demand.
• If the population consists – more of
babies – then demand for baby food,
toys, feeding bottles will increases.
8. Changes in weather condition
 Demand for a commodity may change due to a
change in climatic conditions.
 For example, during summer demand for cool drinks,
ice-creams cotton clothes, fan, cooler etc increases.
 While, during winter and rainy seasons demand for
woolen clothes, rain-coats, umbrella increases.
9. Prosperity & depression
 Demand for goods increases during the period of
prosperity and decreases during depression without
any reference to price.
10. Distribution of income and wealth
 When income wealth is equally distributed the
demand will increase more than it is unequally
distributed.
 Elasticity of Demand
 The law of demand explains the direction of change in
demand due to change in the price.
 But it does not tell us the rate at which demand
changes due to changes in price.
 Elasticity of demand explains the relationship between a
change in price and consequent change in amount
demanded.
 The concept of elasticity of demand was introduced by
Marshall –“Elasticity of demand shows the extent of
change in quantity demanded to a change in price”.
 In other words, “The elasticity of demand in a market is
great or small according as the amount demanded
increases much or little for a given fall in the price &
diminishes much or little or a give rise in price.
Price Elasticity…….

Ed = Percentage Change in Quantity Demanded

Percentage Change in Price

Change in Quantity Demanded Change in Price

= ÷
Quantity Demanded Initially Initial Price

∆Qd P
= *
∆P Qd
Where

∆Qd = Change in Quantity Demanded

∆P = Change in Price
 Elasticity of Demand

Cross Elasticity of
Price Elasticity Income Elasticity
Demand
 1. Price elasticity of demand
 Marshal was the first economist to define price
elasticity of demand.
 Price elasticity of demand measures
changes in quantity demanded to a change
in price.
 It is the ratio of percentage change in quantity
demanded to a percentage change in price.
Percentage change in quantity demand
 Price Elasticity ____________________________________

Percentage change in price

 2. Income elasticity of demand
 Income elasticity of demand shows the change
in quantity demanded as a result of change in
income.
 Income elasticity of demand may be stated as
ratio of change in the quantity demanded
of a good due to changes in the income of
the country.
Percentage change in quantity demanded
 ey _________________________________

Percentage change in income

 3. Cross Elasticity of Demand

 A change in the price of one commodity leads to a

change in the quantity demanded of another
commodity. This is called as cross elasticity of
demand.

Percentage change in quantity demanded of X

Ec
______________________________________________________

Percentage change in price of Y

– ∆ QX Py
∆ PY Qx

∆ Qx = Change in quantity demand for commodity X

∆ Py = Change in price of commodity Y
Py = Price of commodity Y
Qx = Quantity demand for commodity X

–
 Kinds of price elasticity of demand

• Marshal was the first economist, developed concept of price

elasticity of demand.
• Price elasticity of demand is not same for all the
commodities. It may be more for certain goods and less for
some other goods.
• The price elasticity of demand is classified into five kinds.
1. Perfect elastic demand
2. Perfect inelastic demand
3. Unit elasticity of demand
4. Relatively elastic demand
5. Relatively inelastic demand
 1. Perfectly elastic demand
 When a small change in price leads to an
infinitely large change in quantity demanded.
 For example a small rise in price will cause the
quantity demanded of the commodity falling
infinitely, while a small fall in price will cause
substantial increases in price of commodity. ed =
∞
Y

D
D
Price

O X
Quantity Demanded
 2. Perfectly inelasticity of
demand
 In this case even a large change in
price of commodity leads to no
changeYin quantity demanded.
D Ed = 0

P1

P
Price

P2

D
O M X
Quantity of Demand
 3. Unit elasticity of demand
 The change in demand is exactly equal to
the change in price.
 When both are equal the elasticity is said
to be unitary. Ed = 1
Y
D

P
Prices

P1

O M M1
Quantity of Demand X
 4. Relatively more elastic
demand
 It refers to that situation where a proportionate
change in the quantity demanded is much
greater than the proportionate change in price.
 In other words, it refers to that situation where a
small proportionate fall in price of a commodities
is followed by a large proportionate increase in its
Y
quantity demandedD and vice versa. Ed > 1.

P
Prices

P1
D

X
O Quantity Demand
 5. Relatively less elastic demand
 It refers to that situation where the proportionate
change in the quantity demanded is much less
than the proportionate change in price.
 In other words, it refers to that situation where a
great proportionate fall in price of a commodities
followed by a small proportionate changes in
quantity demanded.
Y
Ed < 1. D

P
Price

P1

O M M1 X
Quantity Demand
Table - Types of Price Elasticity of
Demand
Sl No. Types of PED Numerical Description Shape of Curves
Expression
1. Perfectly ∞ Infinite Horizontal
Elastic
2. Perfectly 0 Zero Vertical
Inelastic
3. Unit Elastic 1 One Rectangular
Hyperbola
4. Relatively >1 More than Flat
Elastic One
5. Relatively <1 Less than Steep
Inelastic One
Types of Price Elasticity of Demand
D4 = ∞
D3 = > 1

D D2 = 1
D4
D1 = < 1
D5 = 0
D3
Pric
e

D2
D5 D1

Quantity Demand
 Measurement of elasticity of demand
• For practical purposes, it is not enough to know
whether the demand is elastic or inelastic.
• It is more useful to find out the extent to which
demand is elastic or inelastic.
• Generally four methods are to measure
elasticity of demand.
1. Percentage method
2. Total outlay method
3. Point method
4. Arc method
 1. Percentage method
 This measured by dividing the percentage
change in quantity demanded in response to
percentage change in price.
 Percentage method are also called as ratio
method.
 Percentage method = % Change in Qty Demanded
% Change in Price
 It is also called as formula method or co-
efficient of price elasticity of demand.
 All the five types of price elasticity of demand
can be illustrated.
 D4 = ∞
D3 = > 1

D D2 = 1
D4
D1 = < 1
D5 = 0
D3
Pric
e

D2
D5 D1

Quantity
Demanded
2. Total expenditure/outlay/revenue method
 This method was given by Alfred Marshall.
 Elasticity of demand can be measured on the basis of
change in total outlay/expenditure of a consumer due
to change in the price of a commodity.
 Total Revenue/total outlay = Price X (Quantity
purchase or sold).
 This can know only whether elasticity is equal to one,
greater than one or less than one.
 Unit elasticity (ep = 1)
 Relatively more elasticity (ep = > 1)
 Relatively less elasticity ( ep = < 1)
 Y

P3 Ed = > 1

P1

Ed = 1
Price

P2

P4
Ed = < 1

E3 E4 E2 X
O
Total Outlay
• Total outlay is measured in X axis and
price is shown in Y axis.
• When price falls from P1 to P2, total
expenditure remains the same. Therefore,
elasticity is equal to one. Ed = 1
• When price falls to P4 total expenditure
decreases from E2 to E4, hence elasticity is
less than one. Ed = < 1
• When price decreases from P3 to P1 total
outlay increases from E3 to E2 – in this case,
elasticity is greater than one. Ed = > 1
• This method which is also known as total
revenue method simply classifies demand
into three types. It does not help us to
measure elasticity in numerical terms.
 3. Point method
• This method was also suggested by Alfred
Marshall.
• According to this method, a straight line
demand curve joining the two axes and
measure the elasticity between two points.
• Point method refers to conditions where
the changes in prices as well as changes in
quantities demanded are very small.
• In this method, consider do not large
changes in price or quantities in the
calculation of elasticity's of demanded.
• Point-Elasticity Formula
 Q 1 – Q0 P 1 – P0 or ∆ Q/Q0
 Q0 P0 ∆ P/P0
 ep = ∞
A

ep > 1
Price

ep = 1

ep < 1

ep = 0
0
B
Quantity Demanded
 4. Arc Method
• Arc elasticity of demand is the measurement of elasticity
of demand when large changes in price or quantities are
considered.
• Point elasticity measures only minute changes, where as
arc elasticity is used to calculate elasticity over a
substantial range of price changes.
• Original Quantity – New Quantity
Original Quantity + New Quantity
Arc elasticity =
Original Price – New Quantity
Original Price + New Quantity

• Arc-Elasticity Formula∆
Q1 – Q0 P1 – P0
– Q1 + Q0 P1 + P0
2 2
 Draw a tangent AB on the demand
Price curve at point R
D
ep = Lower Segment Slope of AB = OB/OA
Upper Segment
A
Ep = (OB/OA)* (RN/RM)

S As triangle AOB, AMR and NRB are

similar (OB/OA)= (NB/RN)
R
M Ep = (NB/RN)*(RN/RM)
D = NB/RM

Again NB/RM = RB/AR

Ep = RB/AR
B
O Ep = Lower Segment
N Upper Segment
Quantity Demanded
Factors determines elasticity of
Demand
1. Nature of the commodities
2. Availability of substitutes
3. Variety of uses
4. Joint Demand
5. Deferred Consumption
6. Income groups
7. Proportion of income spent
8. Level of prices
9. Time factor
 1. Nature of the commodity
• The elasticity of demand for any commodities
depends upon the nature of commodities –
necessary, comfort or luxury.
• The demand for necessaries like – food, salt, cloths,
maches etc – inelastic in nature.
• Luxuries commodities like – diamond, gold, silver
more elastic in nature.
2. Availability of substitutes
• Commodities having substitutes have more elastic in
nature.
• When the change in the price of one commodity, the
demand for its substitute is immediately affected.
• If the commodity has no substitutes than elasticity is
inelastic in nature.
 3. Variety of uses

• The demand for a commodity having variety of

uses is more elastic in nature– coal, milk, steel
and electricity etc. If there is a slight fall in the
price of coal, its demand will increase & which
can be uses for various purposes.
• For example, electricity is a multiple use
commodity – a fall in its price will result in a
substantial increase in its demand – people
may use it for cooking, iron, heater etc.
• On the other hand, a rise in its price will result
in restricting its consumption to the most
essential uses. For example, people may use it
for lighting purposes only.
 4. Joint Demand
• There are certain commodities which are jointly
demanded – for example petrol & car, pen & ink,
bread & jam etc.
• The elasticity of demand of the second
commodity depends upon the elasticity of
demand of the major commodity.
• It the demand for cars is less elastic, the
demand for petrol will also be less elastic.
• On the other hand, if the demand for bread is
elastic, the demand for jam will also be elastic.
 5. Postponement of the consumption

• When the demand for a commodity is postponable, its

demand is more elastic than that of the commodities
which cannot be postponed..
• The consumption of T.V. sets, VCR, DVDs, refrigerator,
washing machine etc. can be postponed, if their price
goes up. But the consumption of medicine, salt, food
etc cannot be postponed even if its price rises.
• If the price of any of these articles rises, people will
post-pone their consumption. As a result, their
demand will decrease and vice-versa.
6. Habits of the people
• People who are habituated to the consumption of a
particular commodity like tea, coffee, cigarette, wine
of a particular brand – demand is generally inelastic.
• What ever the price of particular commodities,
habitant use of it.
 7. Consumer’s income
• The elasticity of demand also depends upon the
income.
• Persons who belong to the higher income group,
their demand for commodities is less elastic.
• On the other hand, the demand of persons in
lower income groups is generally elastic.
• A rise or fall in the price of commodities will
reduce or increase the demand on their part.
8. Proportion of income spent
• If a consumer spends a very small part of his
income on goods like newspapers, salt, matchbox
etc, the demand for them will be inelastic.
• On the other hand, consumer spends a larger part
of his income like, T.V sets, refrigerators, washing
machine, the demand of them is elastic.
 9. Level of prices
• The level of prices also influences the elasticity of
demand for commodities.
• When the price level is high, the demand for
commodities is elastic and when the price level is
low, the demand is less elastic.
10. Time factors
• Time factor plays an important role in influencing
the elasticity of demand for commodities.
• The shorter the time in which the consumer buys a
commodities the lesser will be the elasticity of
demand for that product.
• On the other hand, the longer the time which the
consumer takes in buying a commodities, the
higher will be the elasticity for that product.