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How does the number of substitutes affect the price elasticity of demand for a product or...

How does the number of substitutes affect the price elasticity of demand for a product or resource? What does a higher number of substitutes mean for the slope of the demand curve? What does a smaller number of substitutes mean for the slope of the demand curve?

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Answer #1

How does the number of substitutes affect the price elasticity of demand for a product or resource?

  • Price elasticity of demand depends on the availability of substitutes. More number of substitutes implies higher elasticity of demand for a product. On other hand, less number of substitutes means low elasticity of demand.

What does a higher number of substitutes mean for the slope of the demand curve?

  • Higher number of substitutes means slope of demand curve would be less steep or it would be relatively flatter. Consumers can switch to the low price substitutes if price of commodity is increased.

What does a smaller number of substitutes mean for the slope of the demand curve?

  • Smaller number of substitutes means slope of the demand curve would be less steep.
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