Demand tends to be more elastic, the greater the number of good substitutes, the greater the fraction of one’s income devoted to a product and the greater the time allowed to respond to a price change. A True B False

Answer

A True

Explanation

When the demand for a product changes as a result of price change, the product demand is said to be elastic.

A good with greater number of substitutes is more elastic because the consumers have alternative and cheaper options in case the price increases.

With a long period, the consumer gets a better chance to respond to a change in price and find a cheaper substitute hence elasticity increases with time.

As fraction of income devoted to a product increases, the consumer will respond to slight changes in prices by shifting to less expensive products or decreasing the quantity demanded for that product.