Cars have higher price elasticity of demand than tyres and tubes because:
A) tyres and tubes and cars are substitutes.
B) tyres and tubes and cars are complements.
C) cars are a luxury and tyres and tubes are a necessity.
D) tyres and tubes are a luxury and cars are a necessity.

Question

Quizplus · Accepted Answer

The higher price elasticity of demand for cars compared to tyres and tubes is because cars are considered a luxury item, while tyres and tubes are considered a necessity. Therefore, consumers are more sensitive to changes in the price of cars as they can choose to postpone or avoid buying them altogether, while the demand for tyres and tubes tends to be more stable regardless of price changes.

Cars Have Higher Price Elasticity of Demand Than Tyres and Tubes