Figure 2.5.1 -Refer to Figure 2.5.1 above. If close substitutes are difficult to find in the short run, which of the demand curves in the figure best represents market demand in the short run? A) D₁ B) D₂ C) Both curves are short-run curves. D) Both curves are long-run curves.

Question

Quizplus · Accepted Answer

The demand curve that best represents market demand in the short run is D₁ because it is less elastic and more steeply sloped than D₂. This indicates that consumers are less responsive to price changes in the short run and are willing to pay a higher price for the product. The flatter demand curve D₂ suggests that consumers have more alternatives to this product and can easily switch to substitutes if the price increases.

Figure 2.5.1 -Refer to Figure 2.5.1 Above. If Close Substitutes Are Difficult