Question

Goods with many close substitutes tend to have a. more elastic demands. b. less elastic demands. c. price elasticities of demand that are unit elastic. d. income elasticities of demand that are negative.

Answer 1

Answer:

The correct answer is (A)

Explanation:

Normally, goods which close substitutes tend to have more elastic demand as it is easier to switch from one brand to another because they are close substitutes. For example, if the price of Pepsi increases the consumers will easily shift towards Coca-Cola. So, close substitutes are price sensitive and they have high elastic demand compared to other goods.