If a good has a price inelastic demand, then which of the following is not likely to be characteristic of this good?
A) The good is a necessity and is relatively unimportant in the household budget.
B) There are many substitutes for the good.
C) Consumers spend a small percentage of their income on the good.
D) Consumers do not have much time to adjust to market changes.

Question

Quizplus · Accepted Answer

If a good has a price inelastic demand, it means that changes in the price of the good do not have a significant impact on the quantity demanded by consumers. If there are many substitutes for the good (option B), then consumers are more likely to switch to a different product when the price of the original good increases, indicating a more elastic demand. The other options are more likely to be characteristic of a good with a price inelastic demand.

If a Good Has a Price Inelastic Demand, Then Which