The more substitutes that exist in a market,
A)the lower the price elasticity for each product.
B)the greater the income elasticity for each product.
C)the easier it will be to utilize a target profit pricing strategy.
D)the more sensitive consumers will be to changes in the price of a particular product.
E)the more likely the market will be characterized as an oligopoly.

Question

Quizplus · Accepted Answer

The more substitutes that exist in a market, the more sensitive consumers will be to changes in the price of a particular product. This is because if a product becomes too expensive, consumers may switch to a cheaper substitute. Therefore, the demand for the original product is more elastic, or responsive, to changes in price.

The More Substitutes That Exist in a Market