Factors Influencing Price Elascity

FACTORS INFLUENCING PRICE ELASCITY

The price elasticity of demand for a particular demand curve is influenced by the following factors:

* Availability of substitutes: the greater the number of substitute products, the greater the elasticity.

* Degree of necessity or luxury: luxury products tend to have greater elasticity than necessities. Some products that initially have a low degree of necessity are habit forming and can become "necessities" to some consumers.

* Proportion of income required by the item: products requiring a larger portion of the consumer's income tend to have greater elasticity.

* Time period consideSTAGES OF ECONOMIC DEVELOPMENT

This is the term used to describe where the national income (G.N.P) of the economy is increasing at the same the fundamental changes are taking place in the structure of society.

Rostows theory seems to be the best know and articulated. Identified are the 6 stages of economic development.

1. TRADITIONAL SOCIETY

Majority engaged in subsistence agricultural.

Static society

Agriculture primitive

Little or no industry

Political power in the hands of the land owning class.

Inadequate infrastucture

Economic opportunities largely depended on social and economic status of parents.

2. PRE CONDTIONS FOR TAKE-OF

Awareness of potential application of modern technology to agriculture and industry

Under-developed countries influenced by events and living standards in developed economies.

Widely excepted that economic development is possible and desirable

Economic and social change encouraged

Improvements in Infrastructure

Investment increases, industrialisation begins

Commercial and trading expands

3. TAKE0FF

Period of rapid growth

A crucial period for Traditional primary producing economy, transcends to a modern market economy

Infrastructure developed

Manufacturing industry, demand in domestic markets, investment, industrial growth all increase/rise

Increased technology leads to increase in agricultural