The two main factors affecting Ed are the following:
(i) Availability of Substitutions : The closer the substitute, the elasticity of demand for one commodity is higher. For example, coffee and tea can be considered alternatives to each other. If price of one of these goods increases, then the other commodity becomes relatively cheaper. Therefore, consumers buy more of the relatively cheaper goods and less-of the costlier one. The demand elasticity for both items will be high. Besides, the wider the range of the substitutes, the greater the elasticity.
(ii) Time Factor : Price-elasticity of demand also depends on the time that consumers take to adjust to a new price, when the long-term elasticity is high. For this, consumers are able to adjust their expenditure patterns for price changes over a period of time. For instance, if price of TV sets is decreased, demand will not immediately increase unless people possess excess purchasing power. But over time, people may be able to adjust their expenditure pattern so that they can buy a TV set at the (new) lower price.
