A product's price elasticity of demand is likely to be greater
A) if it only has a few substitutes.
B) if consumers spend a small proportion of income on the product.
C) the less time consumers have to adjust to price changes.
D) if the product is a luxury good rather than a necessity.
E) Both answers C and D are correct.

Question

Quizplus · Accepted Answer

The price elasticity of demand for a product is generally greater for luxury goods than for necessities because consumers are more sensitive to price changes for items they perceive as non-essential. Luxury goods can often be postponed or foregone if their prices rise, making their demand more elastic.

A Product's Price Elasticity of Demand Is Likely to Be