Price elasticity of demand is determined by a number of factors. Which of the following is NOT one of those factors?
A)Type of good (necessity or luxury).
B)The availability of substitutes.
C)Importance of purchase relative to a person's disposable income.
D)The cost of production.

Question

Quizplus · Accepted Answer

The cost of production is not a factor that directly determines price elasticity of demand. It may affect the pricing strategy of a firm, but it does not affect how sensitive consumers are to changes in price. The other three factors listed (type of good, availability of substitutes, importance relative to income) directly affect consumer behavior and the responsiveness of demand to changes in price.

Price Elasticity of Demand Is Determined by a Number of Factors