According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?
A)The toothpaste industry is highly competitive.
B)Toothpaste is relatively inexpensive.
C)Toothpaste is considered a luxury good.
D)There are few close substitutes for toothpaste.

Question

Quizplus · Accepted Answer

The price elasticity of demand for a product is influenced by the availability of close substitutes. In this case, the low price elasticity of demand for toothpaste indicates that there are few close substitutes for toothpaste. Therefore, consumers are less likely to switch to another product even if the price of toothpaste increases.

According to a Study of the Price Elasticities of Products