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JAMB Economics 2006 Question 12

Question 12

Elasticity

An important determinant of price elasticity of demand is

  1. A.the state of technology
  2. B.the prices of other commodities
  3. C.the ease of substitution
  4. D.government policy
Show the answer and explanation

Answer: C (the ease of substitution)

Explanation

If a good has close substitutes, buyers switch easily when its price rises, so demand is more elastic.