A product's price elasticity of demand is likely to be greater
A) the less time consumers have to adjust to price changes.
B) if consumers spend a small proportion of income on the product.
C) if it only has a few substitutes.
D) if the product is a luxury good rather than a necessity.
E) Both answers C and D are correct.

Question

Quizplus · Accepted Answer

The price elasticity of demand tends to be greater for luxury goods than for necessities because consumers can more easily adjust their spending on luxury items in response to price changes. Necessities are items that consumers feel they need and are less likely to reduce consumption even if the price increases.

A Product's Price Elasticity of Demand Is Likely to Be