The more broadly a good is defined,
A)the more substitutes it has so the more elastic is its demand
B)the fewer substitutes it has so the more elastic is its demand
C)the more substitutes it has so the less elastic is its demand
D)the fewer substitutes it has so the less elastic is its demand
E)the more complements it has so the more elastic is its demand

Question

Quizplus · Accepted Answer

When a good is defined broadly, it means that there are fewer substitutes for that good, making the demand for it less elastic. This is because consumers have less choice in terms of switching to other products if the price of the good increases. Therefore, the demand for the good is less sensitive to changes in price.

The More Broadly a Good Is Defined