The elasticity of demand is the economic concept used to measure the change generated in the quantities offered of a good or service against the verified changes in the factors that determine it.
The concept of elasticity in economics reveals how sensitive a variable is compared to the variations or changes that have occurred in another variable that determines it. With regard to the elasticity of demand, in general, there are several variables or factors that cause variations in the quantities that consumers are willing to buy in the market.
Therefore, the issue of demand elasticity involves the study or analysis of all the effects experienced in the quantities demanded caused by certain factors. These factors can be qualified as key factors.
Determinants of demand elasticity
As the elasticity of demand seeks to measure the relative changes in the total quantities of product that consumers are willing to acquire in the market. The key factors that cause these variations are:
- Price of the good.
- Price of substitute or complementary goods.
- Consumer income.
- Consumer preference
Of the impact factors mentioned above in this type of elasticity, it must be expressed that the price factor is what most studies focus on in economic theory. This is the reason, due to the importance of the impact on the quantities demanded, that the price elasticity of demand is more frequently spoken.
Price elasticity of demand
Difference between demand elasticity and demand price elasticity
Generally the concepts, demand elasticity and demand price elasticity, are used interchangeably. However, it must be said that these concepts in economics have different meanings.
With regard to variations in the quantities offered as a result verified variations in the quantities demanded by consumers in the market, it should be noted that these variations are not caused solely by the price of the good. They can also be caused by other incidence factors.
These incidence factors are usually very varied. The main incident factors are the following:
- Consumer income.
- Consumer preference
- Price of the good itself.
- Price of substitute and complementary goods.
On the other hand, when the economy is talking about the price elasticity of demand, it is referring only and exclusively to the variations in the quantities demanded due to the variations experienced in the price of the good or service.
