An important determinant of the price elasticity of demand is the:
A) importance in household budgets.
B) level of technology.
C) quantity of the good supplied.
D) extent of government regulation.

Question

Quizplus · Accepted Answer

The importance of a good in a household budget is a key factor in determining the price elasticity of demand. Goods that represent a large proportion of a household's budget are likely to have a more elastic demand, meaning consumers will be more responsive to changes in price. Conversely, goods that represent a smaller proportion of a household's budget are likely to have a more inelastic demand, meaning consumers will be relatively insensitive to changes in price. Other factors, such as the level of technology, quantity of the good supplied, and extent of government regulation, may also play a role, but are not as significant as the importance of the good in a household budget.

An Important Determinant of the Price Elasticity of Demand Is