Question

Price elasticity of demand for a commodity tends to be greater ___________.

• A. when commodity is a necessity
• B. there are closer substitutes available
• C. it is less important in our budget
• D. the price is lower

Answer 1

Answer: (B)

there are closer substitutes available

Price elasticity of demand is greater for Relatively elastic demand.

Relatively elastic demand refers to the demand when the proportionate change produced in demand is greater than the proportionate change in price of a product.

Hence, when close substitutes are available , proportionate change in demand is quite high with change in price.

Thus, the correct option is B.