Question

Which of the following is not a major determinant of the price elasticity of demand? A. availability of close substitutes B. proportion of income spent on the good C. amount of time that has elapsed since the price change D. quantity of goods available

Answer 1

Answer:

The correct answer is option D.

Explanation:

The price elasticity of demand can be defined as the degree of responsiveness of quantity demanded of a commodity to a change in the price of the commodity.  

The price elasticity of demand depends on several factors including

1. Availability of close substitutes
2. The proportion of income that is spent on the good
3. Amount of time consumers have to adapt to the price change

If there are cheaper substitutes available in the market then the demand will be relatively elastic. Similarly, if a small proportion of income is being spent on the good than the demand will be relatively inelastic. Demand in a short period will be inelastic. Though elasticity of demand is not affected by the number of goods available.