Question 14

A good with close substitutes tends to have elastic demand.

Goods that have close substitutes typically exhibit elastic demand because consumers can easily switch to an alternative if the price of the good increases.

A) A good with close substitutes

This option is correct because when a good has close substitutes, consumers are more likely to change their purchasing behavior in response to price changes. If the price for a good rises, consumers can substitute it with a similar product, demonstrating high elasticity of demand.

B) A good with many complements

This option is incorrect as goods with many complements usually have inelastic demand. When the price of one complement increases, the demand for the other complementary goods may not significantly change, as they are often used together.

C) A good that is tangible

This option is not necessarily correct. The tangibility of a good does not directly relate to its elasticity. Both tangible and intangible goods can have elastic or inelastic demand depending on other factors, such as the availability of substitutes.

D) A good with few complements

This option is also incorrect. While having few complements may suggest that the good is less affected by price changes of related products, it does not inherently lead to elastic demand. The elasticity of demand is more closely tied to the availability of substitutes rather than the number of complements.

Conclusion

In conclusion, a good with close substitutes is the definitive answer, as it clearly demonstrates elastic demand due to the consumer's ability to switch to alternatives with price changes. Other options fail to capture the essence of elasticity, either focusing on complementarity or characteristics that do not influence demand sensitivity as directly.