Homework Answers
Answer : The answer is option D.
If many substitutes are available in the market for a particular good then consumers get more choice to purchase the good based on price level. This means that if many substitutes are available in the market then if the price of the good increase then consumers get more choices to purchase substitute goods. In this situation the price elasticity of demand for the good is higher. Therefore, option D is correct.
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5. Determinants of the price elasticity of demand
Consider some determinants of the price elasticity of
demand:
• The availability of close substitutes
• Whether the good is a necessity or a luxury
• How broadly you define the market
• The time horizon being considered
A good with many close substitutes is likely to have relatively
__(Elastic, Inelastic)___ demand since consumers can easily choose
to purchase one of the close substitutes if the price of the good
rises.
A...
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5. Determinants of the price elasticity of demand
Consider some determinants of the price elasticity of
demand:
• The availability of close substitutes
• Whether the good is a necessity or a luxury
• How broadly you define the market
• The time horizon being considered
A good with many close substitutes is likely to have relatively
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to purchase one of the close substitutes if the price of the good
rises.
A...
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