Which factors influence price elasticity of demand?

The factors that influence price elasticity of demand are indeed primarily represented by the availability of substitutes and the nature of the good, whether it is classified as a necessity or a luxury. When substitutes for a good are readily available, consumers can easily switch to these alternatives if the price of the original good increases, resulting in high price elasticity of demand. On the other hand, necessities tend to have inelastic demand because consumers will buy them regardless of price changes, whereas luxuries are more elastic, as consumers can forego these purchases when prices rise.

Considering the broader context that includes the type of market structure and government regulations can provide additional insights into overall market behavior, they do not fundamentally alter the core determinants of demand elasticity in the way that substitutes and the necessity-luxury distinction do. Market structure can affect pricing power and competition, and regulations can influence availability and price but are secondary influences compared to the direct impact of substitutes and consumer preferences.

Thus, the correct answer reflects the most critical and directly relevant factors that influence how sensitive the quantity demanded of a good is in response to changes in price.