The more substitutes there are for a product,
A) the less price elastic the demand for the product is.
B) the more price elastic the demand for the product is.
C) the greater the income elasticity for the product.
D) the smaller the income elasticity for the product.

Question

Quizplus · Accepted Answer

When a product has many substitutes, consumers have more options to switch to if the price of the product increases. This means that the demand for the product is more sensitive to changes in price, making it more price elastic. On the other hand, income elasticity is not directly related to the availability of substitutes, so choices C and D can be ruled out. Choice A is incorrect because when a product has many substitutes, the demand is more price elastic rather than less.

The More Substitutes There Are for a Product