The existence of substitutes for a good and the percentage of one's budget spent on the good are among the factors that determine how elastic the demand for the good will be.

Question

Quizplus · Accepted Answer

The elasticity of demand for a good is influenced by the availability of substitutes (more substitutes typically increase elasticity) and the proportion of a consumer's budget spent on the good (a higher proportion can make demand more elastic, as consumers are more sensitive to price changes).

The Existence of Substitutes for a Good and the Percentage