Consider some determinants of the price elasticity of demand:

• The availability of close substitutes
• Whether the good is a necessity or a luxury
• How broadly you define the market
• The time horizon being considered
A good with many close substitutes is likely to have relatively---------------- demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises.

A good’s price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the most elastic demand?

1. Sports car

2. Chemotherapy for cancer patients

The price elasticity of demand for a good also depends on how you define the good.

Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between.

Categories

Most Elastic

In Between

Least Elastic

Boot-cut jeans
Pants -
Clothing
The price elasticity of demand is also affected by the given time horizon.

If the price of gasoline is relatively high for a long time, consumers are more likely to buy more fuel-efficient cars or switch to alternatives like public transportation. Therefore, the demand for gasoline is ----------------- elastic in the short run than in the long run.