Which of the following goods will have a higher price elasticity of demand?
A)A good with few substitutes.
B)A good with many substitutes.
C)A good that represents a small proportion of the consumer's budget.
D)A good that is broadly defined.
E)A good that is a necessity.

Question

Which of the following goods will have a higher price elasticity of demand?​
A)A good with few substitutes.
B)A good with many substitutes.
C)A good that represents a small proportion of the consumer's budget.
D)A good that is broadly defined.
E)A good that is a necessity.

Quizplus · Accepted Answer

Goods with many substitutes tend to have a higher price elasticity of demand as consumers can easily switch to a substitute if the price of the good increases. This means that the demand for the original good is more sensitive to changes in price. Conversely, goods with few substitutes are more likely to have a lower price elasticity of demand as consumers may not have alternative options to turn to if the price of the good increases.

Which of the Following Goods Will Have a Higher Price