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JAMB Economics 2001 Question 5

Question 5

Elasticity

A normal good with close substitutes is likely to have its price elasticity of demand

  1. A.between zero and one
  2. B.equal to unity
  3. C.less than unity
  4. D.greater than unity
Show the answer and explanation

Answer: D (greater than unity)

Explanation

When close substitutes exist, buyers switch easily if the price rises, so demand is elastic: elasticity greater than 1.