If a good has many close substitutes,then its demand is most likely
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
E) elastic or inelastic depending on whether the price of the good is increasing or decreasing.

Question

Quizplus · Accepted Answer

When a good has many close substitutes, consumers can easily switch to those substitutes if the price of the good increases. This makes the demand for the good more elastic, meaning changes in price have a larger effect on the quantity demanded. On the other hand, if a good has few or no substitutes, consumers are less likely to be able to switch to an alternative, making demand more inelastic. Therefore, for a good with close substitutes, the answer is A) elastic.

If a Good Has Many Close Substitutes,then Its Demand Is