The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1

-Which of the following is a determinant of price elasticity of demand?
A)Availability of substitute goods
B)Excess capacity
C)Scale of production
D)Inventories
E)Cost of production

Question

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-Which of the following is a determinant of price elasticity of demand?
A)Availability of substitute goods 
B)Excess capacity 
C)Scale of production 
D)Inventories 
E)Cost of production

Quizplus · Accepted Answer

Availability of substitute goods is a determinant of price elasticity of demand. It refers to the extent to which consumers can easily switch to alternative products if the price of a particular product increases. The more substitutes available, the more elastic the demand is likely to be, as consumers have more options to choose from. The other options - excess capacity, scale of production, inventories, and cost of production - are not determinants of price elasticity of demand.

The Figure Given Below Shows the Demand Curves for Five