The level of competition provides an indication of how elastic demand is; the higher the level of competition, the less elastic demand will be.

Question

Quizplus · Accepted Answer

The statement is incorrect. The higher the level of competition, the more elastic demand will be. This is because consumers will have more options to choose from, making them more likely to switch to a substitute product if the price of one product increases. Therefore, in a competitive market, firms have to be more sensitive to price changes in order to retain customers.

The Level of Competition Provides an Indication of How Elastic