ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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TRUE
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FALSE
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Either A or B
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None of the above
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Detailed explanation-1: -It means that a small rise in the price of the good would cause a greater fall in its quantity demanded as the buyers would switch to its substitutes. Hence, the demand for a product is more price elastic if more substitutes are available in the market.
Detailed explanation-2: -Close substitutes for a product affect the elasticity of demand. If another product can easily be substituted for your product, consumers will quickly switch to the other product if the price of your product rises or the price of the other product declines.
Detailed explanation-3: -The price elasticity of demand for a good or service will be greater in absolute value if many close substitutes are available for it. If there are lots of substitutes for a particular good or service, then it is easy for consumers to switch to those substitutes when there is a price increase for that good or service.