2.2.6—Elasticity determinants

PED tends to be larger when close substitutes exist, the good is a luxury rather than a necessity, consumers have time to adjust, or the good takes a large share of income. YED and XED have their own category and relationship determinants.

These are tendencies, not automatic results: brand loyalty, habit, information and market definition can change the response.

Petrol may be inelastic in the short run when commuting alternatives are limited but more elastic in the long run as people change cars or routes.

Do not explain every elasticity solely by “necessity”; time horizon and available substitutes may dominate.