If the price of walnuts rises,many people would switch from consuming walnuts to consuming pecans.But if the price of salt rises,people would have difficulty purchasing something to use in its place.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

The example shows that the availability of close substitutes is important in determining the price elasticity of demand. When there are easily available substitutes, consumers can switch to them if the price of one product increases, but if there are no substitutes or alternatives, consumers may have no choice but to pay the higher price. This shows how elastic or inelastic the demand for a product is based on the availability of substitutes.

If the Price of Walnuts Rises,many People Would Switch from Consuming