The demand for a product will tend to be elastic when: a

Economics Jan 19, 2021

The demand for a product will tend to be elastic when:

a. it is quickly consumed.

b. it has few close substitutes.

c. it is subjected to habitual consumption.

d. the purchase of the product takes up a high proportion of a consumer's budget.

Expert Solution

The correct answer is (D).

All the products that take high percentages of the consumer's budget are highly elastic. For example, luxury products are very costly. Any slight increase in the cost of luxury products will imply that the consumer will not afford them. The demand for those particular products decreases.

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