Determine which statement about the absolute value of the price elasticity of de

Question

Determine which statement about the absolute value of the price elasticity of demand is correct. The price elasticity of demand for laundry detergent in general is likely to be greater than the price elasticity of demand for Gain laundry detergent. The price elasticity of demand for Gain laundry detergent is likely to be greater than the price elasticity of demand for laundry detergent in general. The price elasticity of demand for gasoline is greater than the price elasticity of demand for cereal because because more people eat cereal than use gasoline. The price elasticity of demand for gasoline is less than the price elasticity of demand for cereal because because more people eat cereal than use gasoline.

Explanation / Answer

Statement 2 happens to be the correct statement. Because in general, people would definitely use a laundry detergent to do the laundry but speaking of a perticular detergent, there can be substitutes available to do the laundry. Therefore, price elasticity of demand for GAIN laundry detergent would be higher than that for the laundry detergent in general.

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