If a Good Is a Necessity with Few Substitutes,then Demand

question 131

Multiple Choice

If a good is a necessity with few substitutes,then demand will tend to:

• A)be relatively price-elastic.
• B)be relatively price-inelastic.
• C)have price elasticity equal to 1.
• D)be the same as that of a luxury good.

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Definitions:

Variable Costs

Financial outlays that adjust based on the level of a firm's activity.

Selling Price

The amount a customer pays to purchase a product or service.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance premiums.

Total Fixed Costs

Expenses that do not change with the level of production or sales over a short period, including rent, insurance, and salaries.