Editing Price elasticity of demand (section)

==Determinants==
The overriding factor in determining the elasticity is the willingness and ability of consumers after a price change to postpone immediate consumption decisions concerning the good and to search for substitutes ("wait and look").<ref name="Negbennebor, Microeconomics 2001">Negbennebor (2001).</ref> A number of factors can thus affect the elasticity of demand for a good:<ref name="parkin">Parkin; Powell; Matthews (2002). pp.&nbsp;77–9.</ref>

* '''Availability of substitute goods:''' The more and closer the [[substitute good|substitutes]] available, the higher the elasticity is likely to be, as people can easily switch from one good to another if an even minor price change is made;<ref name="parkin" /><ref name="illinois">{{cite web|url=http://my.ilstu.edu/~mswalber/ECO240/Tutorials/Tut04/Tutorial04a.html|title=Tutorial 4a|first=Mark|last=Walbert|access-date=27 February 2010|archive-date=4 December 2008|archive-url=https://web.archive.org/web/20081204053737/http://www.ilstu.edu/~mswalber/ECO240/Tutorials/Tut04/Tutorial04a.html|url-status=dead}}</ref><ref name="GoodwinNelsonAckermanWeisskopf">Goodwin, Nelson, Ackerman, & Weisskopf (2009).</ref> There is a strong substitution effect.<ref name="Frank">Frank (2008) 118.</ref> If no close substitutes are available, the substitution effect will be small and the demand inelastic.<ref name="Frank" />
** '''Breadth of definition:''' The broader the definition of a good (or service), the lower the elasticity, because it is no longer possible to . For example, McDonalds hamburgers will probably have a relatively high elasticity of demand (as customers can switch to other fast-food options), whereas food in general will have an extremely low elasticity of demand, because no substitutes exist.<ref name="Gillespie48">Gillespie, Andrew (2007). p.&nbsp;48.</ref> Specific foodstuffs (ice cream, meat, spinach) or families of them (dairy, meat, sea products) may be more elastic.
* '''Necessity:''' The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price, such as the case of [[insulin]] for those who need it.<ref name="parkin75" /><ref name="illinois" />
* '''Timespan:''' For most goods, the longer a price change holds, the higher the elasticity is likely to be, as more and more consumers find they have the time and inclination to search for substitutes.<ref name="parkin" /><ref name="GoodwinNelsonAckermanWeisskopf" /> When fuel prices increase suddenly, for instance, consumers may still fill up their empty tanks in the short run, but when prices remain high over several years, more consumers will reduce their demand for fuel by switching to [[carpool]]ing or public transportation, investing in vehicles with greater [[Fuel economy in automobiles|fuel economy]] or taking other measures.<ref name="illinois" /> This does not hold for [[consumer durable]]s such as the cars themselves, however; eventually, it may become necessary for consumers to replace their present cars, so one would expect demand to be less elastic.<ref name="illinois" />
* '''Brand loyalty:''' An [[brand loyalty|attachment to a certain brand]] can override sensitivity to price changes, resulting in more inelastic demand.<ref name="Gillespie48" /><ref name="png62">Png, Ivan (1999). pp.&nbsp;62–3.</ref>
* '''Who pays:''' Where the purchaser does not directly pay for the good they consume, such as with corporate expense accounts, demand is likely to be more inelastic.<ref name="png62" />

When measuring [[Marshallian demand function|Marshallian demand]]—the demand curve holding [[Real and nominal value|nominal, rather than real, income]] constant—the percentage of income a customer spends on a certain good also affects the elasticity. In introductory [[microeconomics]], the distinction between Marshallian and [[Hicksian demand function|Hicksian (real-value) demand]] is often ignored, assuming that any particular good will be a small part of the customer's budget, but for large or frequent purchases (e.g. food or transportation) the [[income effect]] can become substantial or even dominate the price effect (as for [[Giffen good|Giffen goods]]).<ref name="parkin" /><ref name="illinois" /><ref name="Frank_a">Frank (2008) 119.</ref> When the goods represent only a negligible portion of the budget, the income effect is insignificant and does not contribute substantially to elasticity.<ref name="Frank_a" />