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22 May, 07:50

Other things being equal, demand is less elastic A. the smaller the percentage of a total budget that a family spends on a good. B. the more expensive the good is. C. the longer is the time period for adjustment. D. the more substitutes a good has.

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  1. 22 May, 08:40
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    The correct answer is letter "D": the more substitutes a good has.

    Explanation:

    Price elasticity of demand is the result of the relation between changes in price and quantity demanded for a good or service. Price elasticity of demand is calculated dividing the percentage change in quantity demanded by the percentage change in price. If the result is equal to or greater than 1, the demand is elastic. This situation implies a minimum change in price will affect by far the quantity demanded of that good or service.

    Thus, products with many substitutes are elastic because a minimal change in their price would represent a large change in quantity demanded since consumers will find similar products that satisfy their needs in the same proportion.
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