Which of the following is a determinant of the price elasticity of demand for an item?
A) The availability of a close substitute for the item
B) The percentage of a consumers budget allocated to expenditures on the item
C) The amount of time available to adjust to a change in the price of the item
D) All of the above are correct

Question

Quizplus · Accepted Answer

All of the factors listed (availability of substitutes, percentage of budget spent on the item, and time to adjust) have been shown to influence the price elasticity of demand for a good or service. When substitution options are easily available, consumers are more likely to switch to the substitute if the price of the original good increases. When a larger portion of a consumer's budget is allocated to a particular item, they are likely to be more sensitive to changes in price. In addition, some goods may become more or less elastic over time as consumers have more or less flexibility to adjust their consumption patterns in response to price changes.

Which of the Following Is a Determinant of the Price