Question : Other things equal if the price elasticity of demand for a good with more substitutes is:
Option 1: Larger
Option 2: Smaller
Option 3: Zero
Option 4: Unity
Answer (1)
19th Jan, 2024
Correct Answer: Larger
Solution :
Other things being equal, a good with more substitutes has a higher price elasticity of demand.
As the consumer can shift its substitutes so that it makes the elasticity larger or higher.
Hence a is the correct answer.
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