The price elasticity of market demand primarily depends on the:
A) number of firms in an industry.
B) cost of producing an industry's output.
C) availability of substitutes.
D) substitutability of inputs in producing a product.
E) supply curves of inputs.

Question

Quizplus · Accepted Answer

The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. This responsiveness is influenced by the availability of substitute products. When many substitutes are available, consumers can easily shift their purchasing decisions in response to price changes, making demand more elastic. Conversely, when few substitutes are available, consumers may be less able to adjust their behavior, leading to inelastic demand. Therefore, the availability of substitutes is the primary determinant of price elasticity of demand.

The Price Elasticity of Market Demand Primarily Depends on The