The value of the price elasticity of demand for a good will be relatively large when

A) the good is a luxury rather than a necessity.

B) there are no good substitutes available for the good.

C) the time period in question is relatively short.

D) All of the above are correct.

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Jarrod RobelLv2

29 Feb 2020

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Related questions

Which is not characteristic of a product with relatively inelastic demand?

The good is regarded by consumers as a necessity.
There are a large number of good substitutes for the good.
Buyers spend a small percentage of their total income on the product.
Consumers have had only a short time period to adjust to changes in price.

emeraldmule11

Determinants of the price elasticity of demand Consider some determinants of the price elasticity of demand:

• Number of substitutes

• Whether the good is a necessity or a luxury

• Percentage of one's budget spent on the good

• Time horizon being considered

A. A good with many close substitutes is likely to have relatively ___________ demand since consumers can easily choose to purchase one of the close substitutes if the price of the good rises.

B. A good's price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the least elastic demand?

1. Chemotherapy for cancer patients

2. Yacht

The price elasticity of demand for good also depends on how you define the good.

C. Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between.

1. Beverages

2. Merlot

3. Wine

D. The price elasticity of demand is also affected by the given time horizon. Other things being equal, the demand for natural gas will tend to be _________ elastic in the short run than in the long run.

browngoat320

FILL IN THE BLANKS

Demand for this good is (enter inelastic, elastic or unitary elastic) with respect to price.

This is a (enter normal or inferior) good as income elasticity is (enter less than, greater than or equal) zero, and it is a (enter necessity or luxury) good as income elasticity is (enter less than, greater than or equal) one.

Widgets and gadgets are (enter complements or substitutes), because cross-price elasticity is (enter positive or negative). Widgets and gadgets (enter are or are not) good substitutes because cross-price elasticity is (enter less than, greater than or equal) (enter the numerical value).