The Most Important Determinant of the Price Elasticity of Demand

question 289

Multiple Choice

The most important determinant of the price elasticity of demand for a good is

• A)the definition of the market for a good.
• B)the availability of substitutes for the good.
• C)the share of the good in the consumer's budget.
• D)whether the good is a necessity or a luxury.

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Definitions:

Total Cost Curves

A graphical representation showing how the total cost of production changes with the level of output, typically upward sloping due to rising production costs.

Extraction Cost

The expenses associated with removing natural resources from the earth, such as mining or drilling.

User Cost

The cost of utilizing a good or service, considering the opportunity cost of not using the asset in an alternative way.