The most important determinant of the price elasticity of demand for a good is
A)the definition of the market for a good.
B)the availability of substitutes for the good.
C)the share of the good in the consumer's budget.
D)whether the good is a necessity or a luxury.

Question

Quizplus · Accepted Answer

The availability of substitutes for a good is the most important determinant of the price elasticity of demand. If there are easily available substitutes for a good, consumers can switch to those substitutes if the price of the good increases, making the demand for the good more elastic. On the other hand, if there are no or very few substitutes, demand for the good will be less elastic. The other options, while they may affect the price elasticity of demand, are not as significant as the availability of substitutes.

The Most Important Determinant of the Price Elasticity of Demand