The three types of Elasticity of Demand are:
i. Price Elasticity of Demand
ii. Income Elasticity of Demand
iii. Cross Elasticity of Demand
Three factors that influence the Elasticity of Demand are:
i.The amount of income spent. According to
www.investopedia.com, It refers to the total a person can spend on a
particular good or services. If there is an increase in price and no
change in the amount of income available to spend on the good, there
will be an elastic reaction in demand. For example, if the price of a
cup of tea raises from RM 1 to RM 2 per cup, while the income of the
consumer remain the same, and the income available to spend on tea is RM
3, is now enough for only 1 cup of tea, instead of 3 cups of teat at RM
1 each before.
ii. The availability of substitute goods. The concept
is when one good has more substitutes, the more elastic demand will be.
Vice versa, when one good is lack of substitutes, it is called an
elastic product. Example of elastic goods are rice, there are variety of
rice in the market that the consumer can choose from, not able to buy
the Basmathi, may be one can consider to buy the subsidize local rice.
Inelastic goods are like unique goods, antiques, rare item like gold and
titanium and so on.
Habit. It simply refers to the habit of the
consumer and one's demand on certain good. For example, a habitual
smoker has more demand in cigarettes, regardless of the price of the
cigarettes,habitual smoker would still buy the cigarettes. The demand
for cigarettes is inelastic. While non regular smoker, has less demand
in cigarettes, when the price of cigarettes fall, the demand of
cigarettes may be increase, and when the price raises, the demand would
also decrease respectively. The demand for cigarettes is elastic.