Which of the following is the most obvious factor affecting the price elasticity of demand for a good?

• A. The number of sellers in the market
• B. The method of production
• C. The level of government taxation
• D. The availability of close substitutes

Answer: (D)

Verified step by step guidance

1. Understand that the price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price.
2. Recall that one of the key determinants of price elasticity of demand is the availability of close substitutes because consumers can easily switch to alternatives if the price rises.
3. Recognize that factors like the number of sellers, method of production, and government taxation affect supply or costs, but do not directly influence how sensitive consumers are to price changes.
4. Focus on the concept that when many close substitutes exist, demand tends to be more elastic since consumers have more options to choose from.
5. Conclude that among the options given, the availability of close substitutes is the most obvious and direct factor affecting the price elasticity of demand.