Question

If a good has close substitutes, the price elasticity of demand for a commodity will be __________ as some other commodities can be used as a substitute to it.

• A. very elastic
• B. very inelastic
• C. unitary
• D. all of above

Answer 1

Answer: (A)

very elastic

If the commodity has many close substitutes the demand for such a commodity will be highly elastic. The reason is that where exists a close substitute in the relevant price range, its demand will tend to be elastic. But in respect of a commodity having no substitute, the demand will be somewhat inelastic.

Hence, the correct option is A.