Which factor tends to decrease Price Elasticity of Demand?

The factor that tends to decrease Price Elasticity of Demand is the real or perceived necessity of a product. When a product is viewed as essential or a necessity, consumers are less sensitive to changes in its price. This is because they require the product for their daily lives, and even if the price increases, they are likely to continue purchasing it to satisfy their needs.

For instance, basic goods such as food staples or medications generally have low price elasticity because consumers will prioritize buying these items regardless of price fluctuations. This means that demand for these necessities remains relatively stable, demonstrating a smaller proportionate change in quantity demanded with changes in price.

In contrast, when substitutes are readily available, demand becomes more elastic, as consumers can easily switch to alternative products in response to price changes. Similarly, a strong competitive market usually enhances elasticity, as more options increase consumer choice. High consumer awareness typically leads to increased price sensitivity, as informed consumers are more likely to seek out the best deals available.