Suppose that Jane enjoys Diet Coke so much that she consumes one can every day.Although she enjoys gourmet cheese,she consumes it sporadically.If the price of Diet Coke rises,Jane decreases her consumption by only a very small amount.But if the price of gourmet cheese rises,Jane decreases her consumption by a lot.These examples illustrate the importance of
A)the availability of close substitutes in determining the price elasticity of demand.
B)a necessity versus a luxury in determining the price elasticity of demand.
C)the definition of a market in determining the price elasticity of demand.
D)the time horizon in determining the price elasticity of demand.

Question

Quizplus · Accepted Answer

Jane's consistent consumption of Diet Coke despite price changes indicates it is a necessity, while her sporadic consumption of gourmet cheese suggests it is a luxury. This illustrates how necessity versus luxury affects price elasticity of demand.

Suppose That Jane Enjoys Diet Coke So Much That She