... services. These items have a low price elasticity of demand, that is the consumer will be less likely to buy another product should the price be changed. The main determinants of elasticity include: Availability of substitutes, the period of time, the product price in relation to the income of the consumer, the price of production and the state of technology. For firms to maximise profits and for government to tax people effectively and maximise their income the causes of a change in demand need to be identified. The main reasons for a change in demand are: Changes in tastes or fashions, changes to peoples disposable income, changes in population and changes or predicted changes in the future availability of goods. Two main assumptions are made, firstly that the main aim is to maximise profits and revenue, and that a change in price reflects a change in revenue. The government is also concerned ...

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