The important determinants of the price elasticity of demand are the
A) number and closeness of available substitutes, importance in consumers' budgets, and length of the time period.
B) number of markets, size of buyers' incomes, and empirical validity.
C) number of firms, number of variables that must be held constant, and degree to which markets are separable.
D) scope and method of measurement and calculation and transitivity of preferences.
E) state of technology, size of the firm's plants, and size of the absolute change in input prices and quantity.

Question

Quizplus · Accepted Answer

The number and closeness of available substitutes, importance in consumers' budgets, and length of the time period are the three most important determinants of the price elasticity of demand. The availability of substitutes determines how easily consumers can switch to alternatives if the price changes. The importance of the product in consumer budgets determines the extent to which consumers will cut back or switch to alternatives if the price changes. Finally, the length of the time period determines how much time consumers have to adjust their behavior in response to a price change.

The Important Determinants of the Price Elasticity of Demand Are