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Determinants of Price<br />
Elasticity<br />
· Availability of substitutes [greater availability of<br />
substitutes makes a good relatively more elastic]<br />
· Portion of the expenditures on the good to the<br />
total budget [lower portion tends to increase<br />
relative elasticity]<br />
· Time to adjust to the price changes [longer time<br />
period means there are more adjustment possible<br />
and increases relative elasticity<br />
· Price elasticity for “brands” is tends to be more<br />
elastic than for the category of goods<br />
Fall '97 www.elearnuganda.net Slide 18
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