Which of the following generalizations is not correct?
A)The larger an item is in one's budget, the greater the price elasticity of demand
B)The price elasticity of demand is greater for necessities than it is for luxuries
C)The larger the number of close substitutes available, the greater will be the price elasticity of demand for particular product
D)The price elasticity of demand is greater the longer the time period under consideration
E)The price elasticity of supply is smaller the shorter the time period under consideration.

Question

Quizplus · Accepted Answer

The price elasticity of demand is typically greater for luxuries than it is for necessities. Necessities are goods that consumers need and will buy regardless of price changes, making their demand less elastic. Luxuries, on the other hand, are non-essential and their demand is more sensitive to price changes, making it more elastic.

Which of the Following Generalizations Is Not Correct