Question

The elasticity of demand for Carlsberg beer is likely to be ________ the elasticity of demand for all beer.

A. Less elastic than B. The same as C. More elastic than D. Less negative than

Answer 1

The elasticity of demand depends on the number of substitutes a product has in the market. A product with more substitutes would mean an increase or decrease in prices would lead to a major change in quantity. However, a product with no substitutes or lesser number of substitutes would mean the quantity will not be impacted much even with the change in the prices or quantity demanded is not very responsive to the change in prices.

In this case, all beer has a limited number of substitutes while Carlsberg beer has a no. of substitutes.

Thus, the elasticity of demand for Carlsberg beer is likely to be more elastic than the elasticity of demand for all beer.

Option C is the correct answer.