Which of the following would cause a demand curve for a good to be price inelastic ?
Correct answer: C. The good is a necessity
- A. The good is luxury
- B. There are a great number of substitutes for the good
- C. The good is a necessity
- D. The good is an inferior good
Explanation
Necessities are difficult to do without, so consumers reduce their purchases only slightly when prices rise. Luxuries and goods with many substitutes generally have more elastic demand.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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