Multiple Choice
Which of the following is a determinant of the price elasticity of demand for a good?
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4. Elasticity
Determinants of Price Elasticity of Demand
Multiple Choice
Which of the following is NOT a factor that affects the price elasticity of demand for a good?
A
The method of production used for the good
B
Time period considered
C
Availability of close substitutes
D
Proportion of income spent on the good
Verified step by step guidance1
Understand that the price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price.
Recall the main factors that typically affect price elasticity of demand: availability of close substitutes, proportion of income spent on the good, and the time period considered.
Analyze each option to see if it logically influences consumers' sensitivity to price changes. For example, availability of close substitutes makes demand more elastic because consumers can switch easily.
Consider the proportion of income spent on the good: if a good takes up a large share of income, demand tends to be more elastic.
Evaluate the method of production: this relates to supply-side factors and does not directly affect how consumers respond to price changes, so it is NOT a factor affecting price elasticity of demand.
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