Question 4 Which of the following is an accurate statement about the effect of close substitutes?...

Question 4 Which of the following is an accurate statement about the effect of close substitutes? a. Goods with few close substitutes will usually have perfectly inelastic demands. b. Goods with few close substitutes will usually have perfectly elastic demands. c. Goods with many close substitutes will usually have elastic demands. d. Goods with many close substitutes will usually have inelastic demands.

Expert Solution

Two goods are substitutes means both can be used in place of the other. Goods with few close substitutes usually have elastic demand because consumers can shift their preferences from one good to another if price of one good changes. But, the demand is not perfectly elastic because there are only few close substitutes available. Goods with many close substitutes means demand will be more elastic.

Answer: option C

Rahul Sunny answered 2 years ago

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