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 a particular product.
D)The price elasticity of demand is greater the longer the time period under consideration.

Question

Quizplus · Accepted Answer

The price elasticity of demand is typically greater for luxuries than for necessities. Necessities are items that consumers must buy regardless of price changes, making their demand less sensitive (inelastic) to price changes, whereas luxuries, which are non-essential, tend to have more elastic demand because consumers can more easily adjust their purchasing habits in response to price changes.

Which of the Following Generalizations Is Not Correct