Demand is more elastic: a. for broadly defined goods than for narrowly defined ones. b. for goods with many substitutes than for goods with only a few. c. in the short run than in the long run. d. for necessities than for luxuries. e. for goods with no substitutes.

Question

Adrianna Pacheco

Business

13 December, 12:10

Demand is more elastic: a. for broadly defined goods than for narrowly defined ones. b. for goods with many substitutes than for goods with only a few. c. in the short run than in the long run. d. for necessities than for luxuries. e. for goods with no substitutes.

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Answers (1)

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Kallie Key · Answer 1

The correct answer is letter "B": for goods with many substitutes than for goods with only a few.

Explanation:

Elasticity is a characteristic of certain items by which changes in their price represent a change in their quantity demanded. Demand elasticity is calculated by dividing the percentage change in quantity demanded by the percentage change in price. If the result is equal or greater than (1) the demand is elastic. If the demand is lower than 1, then it is inelastic.

Goods with many substitutes are considered elastic because minimal changes in their price represent considerable changes in their quantity demanded. As consumers have different options from where to select if the price of one of the substitutes increase (for instance), the quantity demanded for that good could face a drastic drop.