Economists classify the non-price determinants of demand into 5 groups: expected price (Pe) price of other goods (Pog) income (I or Y) (In Macroeconomics “I” usually stands for “investment” and “Y” stands for “income”.)

What are a Non-Price Determinants of Demand? Non-price Determinants of Demand refers to the factors other than the current price that can potentially influence the demand of a service or product and hence result in a shift in its demand curve.

Price is not a determinant of demand, thus a change in price does not cause demand to increase or decrease. If the price of new cars changes, ceteris paribus, there will be a change in the quantity demanded and a movement along the demand curve.

There are many factors influencing pricing decisions. The common ones are group into four as follows: customers, competitors, the quality of the product, product costs, as well as profit maximization.

The four factors that affect price elasticity of demand are (1) availability of substitutes, (2) if the good is a luxury or a necessity, (3) the proportion of income spent on the good, and (4) how much time has elapsed since the time the price changed.

Determinants of health: Nutrition, lifestyle, environment, and genetics are considered as core determinants and four pillars of health.

The most important determinant of a product’s elasticity is the availability of close substitutes. If substitutes are available, customers are likely to be very responsive to changes in price. The demand is elastic. If substitutes are not available, demand is likely to be unresponsive to price changes.

The price elasticity of supply is determined by: Number of producers: ease of entry into the market. Spare capacity: it is easy to increase production if there is a shift in demand. Ease of switching: if production of goods can be varied, supply is more elastic.

Examples of price elastic demand We say a good is price elastic when an increase in prices causes a bigger % fall in demand. e.g. if price rises 20% and demand falls 50%, the PED = -2.5. Examples include: Heinz soup.

Price elasticity of demand is a measurement of the change in consumption of a product in relation to a change in its price. Expressed mathematically, it is: Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price.

Measurement of Price Elasticity. The elasticity of demand refers to the responsiveness of the demand due to the change in the determinants of the demand. There are three types of elasticity of demand viz. price elasticity of demand, the income elasticity of demand and cross elasticity of demand.

The price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price. The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

The price elasticity of demand (PED) is calculated by dividing the percentage change in quantity demanded by the percentage change in price.