PED

• Factors affecting PED and PES

  • Availability of substitutes
  • Proportion of income
  • Type of good
  • Time
• No available substitutes

  Demand for the product is inelastic as consumers are unreactive to a change in price and cannot switch to an alternative
• Good takes up a LARGE proportion of income

  Relatively price elastic
• Good takes up a SMALL proportion of income

  Relatively price inelastic
• Luxury good

  Relatively elastic
• Necessity good

  Relatively inelastic
• Addictive good

  Relatively inelastic
• Short term

  Buyers have locked in spending patterns to purchase are same thing (durable goods)
• Long term

  Buyers have the opportunity to change spending patterns