Demand for an item tends to be more price elastic if: O There are few substitute

Question

Demand for an item tends to be more price elastic if: O There are few substitutes, the item is a small part of the consumer's budget, and the longer the time period the consumer has to adjust to the price change O There are many substitutes, the item is a small part of the consumer's budget, and the longer the time period the consumer has to adjust to the price change. O There are many substitutes, the item is a large part of the consumer's budget, and the longer the time period the consumer has to adjust to the price change. There are many substitutes, the item is a large part of the consumer's budget, and the shorter the time period the consumer has to adjust to the price change There are few substitutes, the item is a large part of the consumer's budget, and the shorter the time period the consumer has to adjust to the price change.

Explanation / Answer

If demand is more price elastic it means that for small changes in price the quantity demanded changes to a large extent .

Hence only when there are many substitutes the elasticity can be high . The consumer can easily switch from one good to another .

If the product occupies a large portion of consumer budget then the elasticity is more . Since large portion of income is spent on them so the elasticity is high

The longer the time period higher the price elasticity . People get time to adjust to new prices .

Answer : C

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