For a particular good,a 5 percent increase in price causes a 2 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?
A)There are many close substitutes for this good.
B)The good is a luxury.
C)The market for the good is broadly defined.
D)The relevant time horizon is long.

Question

Quizplus · Accepted Answer

The good is likely to have inelastic demand, as the percentage decrease in quantity demanded is less than the percentage increase in price. This suggests that the market for the good is broadly defined, meaning there are fewer substitutes and consumers are less sensitive to price changes.

For a Particular Good,a 5 Percent Increase in Price Causes