Suppose two goods are perfect substitutes. The price elasticity of demand of one of the goods is
A) 0.
B) 1.
C) 1000.
D) infinity.

Question

Quizplus · Accepted Answer

If two goods are perfect substitutes, consumers are willing to switch back and forth between the two goods regardless of the price. Therefore, the price elasticity of demand for one of the goods is infinite because even a small change in price would cause consumers to switch completely to the other good.

Suppose Two Goods Are Perfect Substitutes