Which of the following is most likely to have a low price elasticity of demand? A good that is very expensive. A good with no close substitutes. A good that most people consider a luxury. All are equally likely to have a low price elasticity of demand.
Answer:
The demand for goods that are expansive, luxurious, and goods having many substitutes will be highly elastic. The demand for goods that are expansive is elastic because due to a rise in price the quantity demanded will decrease by a large amount. It is because it involves a large amount of money and even if the price rises by 1% then also it will require a large amount of additional money. For instance the demand for gold. If the price of gold rises then its quantity demanded falls by a large amount.
The demand for luxurious goods is also highly elastic.
Now, the demand for the goods having no close substitutes will have a low price elasticity of demand. It is because even if the price rises people will have no other options so they will keep buying the good and the quantity demanded will not decrease by a large amount.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
