The Determinants of PED - Meaning of determinants is the factors of a change

• Some products are more responsive to changes in prices than other products

• The factors that determine the responsiveness are called the determinants of PED & include:

  • Availability of substitutes: good availability of substitutes results in a higher value of PED (relatively elastic)

  
  

  • Addictiveness of the product: addictiveness turns products into necessities resulting in a low value of PED

    (relatively inelastic)

  
  

  • Price of product as a proportion of income: the lower the proportion of income the price represents, the lower the PED value will be. Consumers are less responsive to price changes on cheap products (relatively inelastic)

  
  

  • Time period: In the short term, consumers are less responsive to price increases resulting in a low value of PED (relatively inelastic). Over a longer time period consumers may feel the price increase more and will then look for substitutes resulting in a higher value of PED (relatively elastic)