how is the price elasticity of demand of a commodity affected by availability of its close substitution? explain.
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Demand for a commodity with large number of substitutes will be more elastic. The reason is that even a small rise in its prices will induce the buyers to go for its substitutes. For example, a rise in the price of Pepsi encourages buyers to buy Coke and vice-versa.
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Demand for a commodity with large number of substitutes will be more elastic. The reason is that even a small rise in its prices will induce the buyers to go for its substitutes. ... Thus, availability of close substitutes makes the demand sensitive to change in the prices.
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