The price elasticity of demand for an exhaustible natural resource tends to
A)fall over time because extraction costs rise over time.
B)stay constant over time because the resource's price rises at a constant rate.
C)rise over time because the resource's rising price stimulates conservation and the development of substitutes.
D)rise over time because resource extraction tends to become more efficient over time.

Question

Quizplus · Accepted Answer

The rising price of an exhaustible natural resource over time tends to stimulate conservation and the development of substitutes, leading to a higher price elasticity of demand. As consumers become more aware of the resource's scarcity and the need to conserve it, they become more responsive to changes in its price, and are more likely to switch to alternatives. This makes the demand for the resource more elastic over time, as its price has a stronger effect on the quantity demanded.

The Price Elasticity of Demand for an Exhaustible Natural Resource