Theory of consumer behaviour — Economics STD 12 Humanities & Commerce — Question

Availability of close substitutes for the commodity: A commodity will have elastic demand if there are close substitutes available, e.g., Pepsi, Coca-Cola, Frooti. A commodity having no substitutes, e.g., salt will have inelastic demand.

Nature of good: Generally, the demand for necessaries is inelastic and that for luxuries elastic. This is so because certain goods which are essential for life will be demanded at any price, whereas goods as luxuries can be dispensed easily if they appear to be costly.

Uses of the commodity: If a commodity has only a few uses, e.g., butter, its demand is likely to be inelastic. If on the other hand, a commodity has many uses, its demand is likely to be elastic, e.g., milk.

Share in total expenditure on the commodity: The demand for such commodities where a small part of the income spent is generally inelastic such as commodities like needle, match box, etc. On the other hand, the demand for such commodities where a significant part of income is spent, is very elastic, such as demand for woollen suit, other luxuries etc.

Tastes and preferences/ Habits: If the consumers are habitual of some commodities, the demand for such commodities will be usually inelastic, because they will use them even if their prices go up. A smoker generally does not smoke less when the price of cigarettes goes up.