The price elasticity of demand for a product tends to be greater the
A)lower its price.
B)more broadly the product is defined.
C)fewer close substitutes for it there are.
D)more close substitutes for it there are.
E)shorter the time span being considered.

Question

Quizplus · Accepted Answer

The more close substitutes there are for a product, the greater the price elasticity of demand, as consumers have more options to choose from if the price of the product increases. This means that if a substitute becomes cheaper, consumers are more likely to switch to that alternative. Therefore, the demand for the original product is more sensitive to changes in price, making it more elastic.

The Price Elasticity of Demand for a Product Tends to Be