Explain how the availability of substitutes affects demand elasticity
What will be an ideal response?
Typically the more substitutes that are available for a given product the more price elastic that product will become. That is, consumers will likely be more sensitive to a given price change. By contrast, in markets where there are few or poor quality substitutes this will likely lead to be more price inelastic because of the smaller number of choices available. In this case consumers are likely to be less sensitive to a given price change.
You might also like to view...
The great German hyperinflation during 1922-1923 can be attributed to the:
A) German government printing money to pay bills. B) absence of financial intermediaries in Germany. C) emergence of large number of monopolies in Germany. D) economic policy that restricted the import of goods into Germany.
Which of the following is an example of foreign direct investment in China?
A) Chinese Shenzen Airlines company buys a small U.S. midwest airline company, Air Chicago. B) The bank of China purchases U.S. Treasury bonds. C) A U.S. foreign exchange speculator buys $200,000 worth of the Chinese currency the yuan. D) The U.S. company Walmart buys a warehouse in Shanghai. E) U.S. auto entrepreneur Elon Musk buys stock in Alibaba Group Holding Limited of Hangzhou, China.