Which of the following is a determinant of the price elasticity of demand for a product? I. The existence of substitute goods
II) The percentage of a consumer's total budget devoted to purchases of that commodity
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Question

Quizplus · Accepted Answer

Both I and II are determinants of the price elasticity of demand. The existence of substitute goods affects the degree to which consumers can easily switch to an alternative product when the price of a particular product increases, while a larger percentage of the consumer's budget dedicated to the commodity may make them more price sensitive and thus more likely to seek out cheaper alternatives.

Which of the Following Is a Determinant of the Price