Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 5 - Part II - Elasticity and its Application - Quick Check Multiple Choice - Page 108: 1

Answer

a. a small elasticity of demand.

Work Step by Step

As the availability of substitutes is a determinant of the price elasticity of demand, the answers can only be a or b. The lower the availability of substitutes the lower the price elasticity of demand. Since the medicine is described to not have any close substitutes, the medicine will have an inelastic demand and hence low price elasticity of demand. Thus, the answer is a.
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