The Elasticity of Demand for a Product Is Likely to Be

question 294

Multiple Choice

The elasticity of demand for a product is likely to be greater,

• A)if the product is a necessity, rather than a luxury good.
• B)the greater the amount of time over which buyers adjust to a price change.
• C)the smaller the proportion of one's income spent on the product.
• D)the smaller the number of substitute products available.

---

Definitions:

Expected Price Level

The anticipation or forecast of future prices across an economy, affecting consumer and business decisions.

Long-Term Contracts

Agreements that extend over a significant period of time, often involving commitments to buy or sell goods or services or to provide employment.

Recessionary Gaps

Situations where an economy's actual output is less than its potential output, often characterized by unemployment and underutilized resources.

Natural Rate

The natural rate often refers to the unemployment rate when the economy is at full capacity, balancing the number of job seekers with job vacancies without accelerating inflation.