Name three determinants of elasticity identified in the text. Explain how each one affects the responsiveness of demand
What will be an ideal response?
(1) Availability of substitutes. Where fewer substitutes are available, demand will tend to be more inelastic. (2) The importance of being unimportant. Where an item represents a smaller portion of a total budget, demand will tend to be more inelastic. (3) The time dimension. The greater the time available to adjust behavior, the more elastic demand tends to be.
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The traditional view of the production process is that capital is subject to
a. constant returns. b. increasing returns. c. diminishing returns. d. diminishing returns for low levels of capital, and increasing returns for high levels of capital.
Japan exports cars to the other countries of the world. In an open economy Japan is most likely to have a domestic price that is ________ the world price of cars.
A. less than B. close to C. equal to D. greater than