Luxuries vs Necessities

The 4 determinants of price elasticity of demand is Luxuries vs Necessities, Availability of Substitutes, Level of Income and Habit. For the determinant of Luxuries vs Necessities, Luxuries is tend to elastic demand this is because luxuries is not compulsory in our daily. 

When the price of luxuries increases, the sales will decrease. For example, when the price of a diamond increase, the quantity of selling diamond will decrease. For the necessities, it is tend to inelastic demand. This is because necessities is a thing that we cannot be ignore in our daily life. So when the price of necessities increase, the quantity of selling necessities will not be decrease. This is because we need it desperately, compare to luxuries. 

Determinant of Availability of Substitutes is also the elastic of demand. The more the substitute the more the elastic of demand. Nowadays, there are a lot of choices that are available in the market. If a price of the brand is decrease, the consumer will purchase more and the quantity will increase. For an example, if the Apple company smartphone price has increase, the percentage of quantity selling Apple smartphone will decrease and it may cause the percentage of quantity selling Samsung smartphone increase. This is because the consumer may choose the cheaper products to purchase. While the determinants of level of income, the people have the higher income have an elastic demand. This is because they have a lot of money, although the price have increase, but the percentage of quantity will not decrease and they will not be affected. 

Lastly, the determinants of habit also tend to be inelastic. This is because consumer need it desperately and it will buy although the price is high. For an example, the smoker need the cigarettes and they will cause the quantity of selling cigarettes increase.

This is one example of the Luxury!

And this are examples of the Necessities

Sources: http://www.apple.com