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

Answer 1

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.