When the price of milk goes up,demand does not fall significantly,because people still need to buy milk.However,if the price of T-bone steaks rises beyond a certain point,people will buy fewer of them because they can turn to the many substitutes for this cut of meat.This refers to price elasticity of demand.

Question

Quizplus · Accepted Answer

This statement correctly describes price elasticity of demand. The concept of price elasticity of demand measures the responsiveness of quantity demanded to changes in price. Products that have many substitutes tend to have a higher price elasticity of demand, meaning that even small changes in price can lead to significant changes in the quantity demanded. On the other hand, products that have few substitutes tend to have a lower price elasticity of demand, meaning that changes in price have less of an impact on the quantity demanded. Milk is an example of a product with a relatively low price elasticity of demand, while T-bone steaks are an example of a product with a relatively high price elasticity of demand.

When the Price of Milk Goes Up,demand Does Not Fall