Price elasticity of demand is defined as a measure of the extent to which the quantity demanded of a good or service changes when the price of a good or service changes (and all other influences on buyers plans remain the same).

2.1 Pick a business that you know something about or can find information on. Describe the business and its main product or service.

2.2 For each of the factors that influence the price elasticity of Demand, describe how your main product or service (described in 2.1) is affected. Does the factor indicate demand is more elastic or more inelastic?

SUBSTITUTION EFFECT

2.2.1 Luxury or Necessity - from the consumer's point of view is this a luxury or a necessity? Does the factor indicate demand is more elastic or more inelastic?

2.2.2 Narrowness of definition - from the consumer point of view is the good or service narrowly defined? Does this factor indicate demand is more elastic or more inelastic (Another way of looking at this is to ask how much of the market does your product or service cover. If it covers only a narrow portion of the market, it is elastic. Broad market coverage indicates inelastic?

2.2.3 Time to react - How long does a consumer normally have to shop around for this product or service? Does this factor indicate demand is more elastic or more inelastic?