Day: December 13, 2017

Demand for a product is more likely to be price elastic if?

Select ONE answer:

1. It is heavily branded
2. There are few substitutes
3. It is patented
4. There are many similar products
5. It is heavily differentiated

Explain with a real-life example what is meant by a price-elastic product:
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 4 – A number of factors come into play in determining whether demand is price elastic or price inelastic in a given market. Factors affecting price elasticity of demand include the number of close substitutes; the cost of switching between products; the degree of necessity or whether the good is a luxury; the proportion of a consumer’s income allocated to spending on the good; the time period allowed following a price change – demand is more price elastic, the longer that consumers have to respond to a price change; whether the good is subject to habitual consumption; peak and off-peak demand; and the breadth of definition of a good or service. With many similar products, there is no protection for the product against being switched to another competing product.

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