Explain any four factors influencing elasticity of demand.

Answer: The main factors that determine elasticity of demand are:

1. Nature of the commodity: necessaries (salt, food grains) have inelastic demand; luxuries (AC, jewellery) have elastic demand; comforts are moderately elastic.
2. Availability of substitutes: goods with close substitutes (tea and coffee) have elastic demand; goods without substitutes (salt) have inelastic demand.
3. Number of uses: a commodity with several uses (electricity, milk) has elastic demand; one with a single use has inelastic demand.
4. Habits: goods to which consumers are habituated (cigarettes, tea) have inelastic demand.
5. Durability: durable goods tend to have elastic demand since their purchase can be postponed; perishable goods tend to have inelastic demand.
6. Income of the consumer: demand of the rich is generally inelastic; demand of the poor is more elastic.
7. Proportion of income spent: goods on which a very small part of income is spent (matchbox, salt) have inelastic demand.
8. Time period: demand is more elastic in the long period than in the short period.