The factors that influence these elasticities of demand
Several factors determine how sensitive demand is to a price, income, or related-price change. Knowing these factors helps you predict whether a good's demand will shift a lot or a little.
Real World
When Lidl entered the UK grocery market, it gave shoppers a close substitute for Tesco's own-brand products, making demand for Tesco goods more price elastic — small price rises caused significant customer losses.
Exam Focus
When asked to 'explain' a factor, always link it to the ease or difficulty of switching behaviour to secure full marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
How well did you know this?