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What will be the effect on price elasticity of demand, if the time required to find the substitute product is more. -

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Question

What will be the effect on price elasticity of demand, if the time required to find the substitute product is more.

Options

  • Price elasticity will increase

  • Price elasticity will remain same

  • Price elasticity will decrease

  • More information required

MCQ

Solution

Price elasticity will increase

Explanation:

The price elasticity of demand varies in direct proportion to the length of time. The price elasticity will increase if the time necessary to find a substitute commodity is longer, and vice versa. This means that the elasticity for a shorter period of time is always low or even inelastic.

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