Question

The elasticity of demand will be greater (in absolute value) if a.it makes up a relatively...

The elasticity of demand will be greater (in absolute value) if

a.it makes up a relatively small share of consumers' total budget

b.it is relatively easy for producers to switch over to producing another good

c.relatively close substitutes for the good are available

d.both A and C

e.All of above

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Answer #1

The answer is (d) both A and C

A is true as this means that the good in question is not really a necessary component of the basket of consumption of the consumer and he can do without it if the prices are raised. Thus, high elasticity.

C is true as this means that a consumer can easily switch to another product if the price of one good rise.

B is false as this has to do with supply elasticity which does not amtter in out analysis for the elasticity ofdemand.

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