A good with many close substitutes is likely to have relatively (elastic , inela
ID: 1165217 • Letter: A
Question
A good with many close substitutes is likely to have relatively (elastic , inelastic) demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises.
If the price of gasoline is relatively high for a long time, consumers are more likely to buy more fuel-efficient cars or switch to alternatives like public transportation. Therefore, the demand for gasoline is (more, less, or no more nor less) elastic in the short run than in the long run.
1. Determinants of the price elasticity of demand Consider some determinants of the price elasticity of demand: The availability of close substitutes Whether the good is a necessity or a luxury How broadly you define the market The time horizon being considered A good with many close substitutes is likely to have relatively substitutes if the price of the good rises. demand, since consumers can easily choose to purchase one of the close A good's price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the most elastic demand?Explanation / Answer
a) A good with many close substitutes will be more "elastic" demand.
b) The sports car will have a more elastic demand. (it is a luxury good and not necessary compared to other mentioned good.)
c) Beverages = Least elastic.
Wine = in between
Merlot = Most elastic.
d) The demand for gasoline is "less elastic" in the short run than in the longrun.