Which of the following comparisons is true regarding price elasticity of demand?
A) The demand for monthly car payments is less elastic than the demand for a monthly gym membership because the car payments require a greater share of the consumer's income.
B) The demand for gasoline a year after a price change is less elastic than the demand for gasoline a week after a price change because consumers have had time to adjust.
C) The demand for water is less elastic than the demand for diamonds because water is a necessity but diamonds are a luxury.
D) The demand for cough syrup is less elastic than the demand for insulin because there are no close substitutes for insulin.

Question

Which of the following comparisons is  true  regarding price elasticity of demand?
A) The demand for monthly car payments is less elastic than the demand for a monthly gym membership because the car payments require a greater share of the consumer's income.
B) The demand for gasoline a year after a price change is less elastic than the demand for gasoline a week after a price change because consumers have had time to adjust.
C) The demand for water is less elastic than the demand for diamonds because water is a necessity but diamonds are a luxury.
D) The demand for cough syrup is less elastic than the demand for insulin because there are no close substitutes for insulin.

Quizplus · Accepted Answer

The demand for necessities like water is generally less elastic because they are essential, whereas luxuries like diamonds have more elastic demand as they are not essential.

Which of the Following Comparisons Is True Regarding Price Elasticity