The fundamental determinant of the elasticity of demand for a good is:
A) the opportunity cost of producing the good.
B) the value that consumers place on one more unit of the good.
C) how easy it is to substitute the good for another.
D) the number of consumers in the market.

Question

Quizplus · Accepted Answer

The elasticity of demand for a good depends on how easy it is to substitute the good for another. If there are many close substitutes available for a good, then the demand for the good will be more elastic. On the other hand, if there are few substitutes, then the demand for the good will be more inelastic. The opportunity cost of producing the good, the value that consumers place on one more unit of the good, and the number of consumers in the market may affect the demand for the good, but they are not the primary determinants of the elasticity of demand.

The Fundamental Determinant of the Elasticity of Demand for a Good