The number of substitutes that a product has is irrelevant in deciding how responsive the quantity demanded of a good is to a change in its own price.

Question

Quizplus · Accepted Answer

The number of substitutes that a product has is a major determinant of the price elasticity of demand. If a product has many substitutes, consumers have more options and may switch to a substitute if the price of the original product increases, making the demand for the original product more elastic. Conversely, if a product has few substitutes, consumers have fewer options and may be willing to pay a higher price for the original product, making the demand for the original product more inelastic.

The Number of Substitutes That a Product Has Is Irrelevant