Which of the following would tend to DECREASE the elasticity of demand for good X?
A)The cost of producing X decreases.
B)Several firms which used to produce substitutes for X go out of business.
C)Consumers begin spending a smaller percentage of their income on X.
D)both b and c
E)all of the above

Question

Quizplus · Accepted Answer

Option A is incorrect because a decrease in the cost of producing X could lead to a decrease in its price, which would increase the elasticity of demand. Option B is correct because with fewer firms producing substitutes for X, consumers would have fewer options to choose from, making it less likely for them to switch to other products. Option C is correct because as consumers spend a smaller percentage of their income on X, it becomes less important to them, reducing their responsiveness to any changes in its price. Therefore, both options B and C would lead to a decrease in the elasticity of demand for good X.

Which of the Following Would Tend to DECREASE the Elasticity