Which of the following would tend to INCREASE the elasticity of demand for good X? Multiple Choice All of these options are correct the percentage of a consumer's income spent on good X increases. a new product, Y, which can be used as a complement of X, is introduced. a new discovery allows firms to produce X at a much lower cost.
Which of the following would tend to INCREASE the elasticity of demand for good X? Multiple Choice All of these options are correct the percentage of a consumer's income spent on good X increases. a new product, Y, which can be used as a complement of X, is introduced. a new discovery allows firms to produce X at a much lower cost.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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![**Question:** Which of the following would tend to INCREASE the elasticity of demand for good X?
**Multiple Choice:**
- [Selected] All of these options are correct
- the percentage of a consumer’s income spent on good X increases.
- a new product, Y, which can be used as a complement of X, is introduced.
- a new discovery allows firms to produce X at a much lower cost.
**Explanation:**
This question asks about factors that increase the elasticity of demand for a particular good, labeled X. An increase in elasticity implies that consumer demand for good X is more responsive to price changes.
1. **Consumer Income:** As the percentage of a consumer's income spent on good X increases, the demand becomes more elastic. Consumers are likely to be more sensitive to price changes when a larger portion of their budget is at stake.
2. **Complementary Product:** The introduction of a new product, Y, which complements good X, can increase demand elasticity. If consumers like using X alongside Y, they may become more responsive to price changes in X.
3. **Production Cost:** A discovery that reduces production costs for good X may lead to lower prices and more competitive markets. This can make demand more elastic as consumers have more substitutes or options available.
The key point is that all these factors collectively contribute to an increase in demand elasticity for good X.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcb0f4bab-4f32-4fca-9ced-04b298ae980f%2F34f81638-e5f9-4631-8d43-2e16f5e36ee1%2Fjsnz2rk_processed.png&w=3840&q=75)
Transcribed Image Text:**Question:** Which of the following would tend to INCREASE the elasticity of demand for good X?
**Multiple Choice:**
- [Selected] All of these options are correct
- the percentage of a consumer’s income spent on good X increases.
- a new product, Y, which can be used as a complement of X, is introduced.
- a new discovery allows firms to produce X at a much lower cost.
**Explanation:**
This question asks about factors that increase the elasticity of demand for a particular good, labeled X. An increase in elasticity implies that consumer demand for good X is more responsive to price changes.
1. **Consumer Income:** As the percentage of a consumer's income spent on good X increases, the demand becomes more elastic. Consumers are likely to be more sensitive to price changes when a larger portion of their budget is at stake.
2. **Complementary Product:** The introduction of a new product, Y, which complements good X, can increase demand elasticity. If consumers like using X alongside Y, they may become more responsive to price changes in X.
3. **Production Cost:** A discovery that reduces production costs for good X may lead to lower prices and more competitive markets. This can make demand more elastic as consumers have more substitutes or options available.
The key point is that all these factors collectively contribute to an increase in demand elasticity for good X.
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