Multiple Choice
Which of the following are three key factors that determine the price elasticity of demand for a product?
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4. Elasticity
Determinants of Price Elasticity of Demand
Multiple Choice
Which of the following is NOT a major determinant of the price elasticity of demand?
A
The availability of close substitutes
B
The cost of production for the seller
C
The time period considered
D
The 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 major determinants of price elasticity of demand, which typically include: the availability of close substitutes, the proportion of income spent on the good, and the time period considered.
Analyze each option to see if it directly affects consumers' responsiveness to price changes. For example, the availability of close substitutes makes demand more elastic because consumers can easily switch to alternatives.
Consider the cost of production for the seller. This factor influences supply decisions rather than demand responsiveness, so it is not a determinant of price elasticity of demand.
Conclude that the correct answer is the factor that does not affect demand elasticity, which in this case is the cost of production for the seller.
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