When the availability of substitutes is low and the urgency of need is high, the price elasticity of demand is
Group of answer choices
A elastic.
B unitary.
C positive.
D inelastic.
The correct answer and explanation is:
The correct answer is D) inelastic.
Price elasticity of demand refers to how sensitive the quantity demanded of a good or service is to changes in its price. When the availability of substitutes is low and the urgency of need is high, consumers have fewer alternatives to turn to, and the necessity of the product often outweighs the price.
In such situations, the demand tends to be inelastic, meaning that even if the price increases, the quantity demanded does not decrease significantly. This happens because consumers have limited options and may be willing to pay a higher price to meet their immediate need. A classic example of this could be life-saving medications or essential utilities, where alternatives are not readily available, and the urgency of the situation drives demand regardless of price.
When demand is inelastic, the price elasticity coefficient is less than 1, indicating that the percentage change in quantity demanded is less than the percentage change in price. In contrast, when substitutes are readily available or the need for the good is not urgent, demand tends to be more elastic. This means consumers can more easily switch to alternatives if the price increases.
In conclusion, low availability of substitutes and high urgency make demand inelastic, because consumers will prioritize purchasing the product, even at higher prices, due to the lack of alternatives and the necessity of the good.