Why does the price elasticity of demand generally increase (become more elastic) over time?

• A. Consumers have more time to find substitutes and adjust their consumption habits.
• B. Consumers' preferences become fixed and less responsive to price changes over time.
• C. Producers reduce the price of goods over time, making demand more elastic.
• D. The supply of goods becomes perfectly inelastic over time.

Answer: (A)

Verified step by step guidance

1. Understand the concept of price elasticity of demand, which measures how much the quantity demanded of a good responds to a change in its price. It is calculated as \(\text{Price Elasticity of Demand} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}\).
2. Recognize that elasticity can vary over different time horizons: in the short run, consumers have limited ability to change their consumption habits, while in the long run, they can adjust more fully.
3. Consider that over time, consumers have more opportunities to find and switch to substitute goods, which increases their responsiveness to price changes, making demand more elastic.
4. Note that as consumers adjust their behavior and consumption patterns over time, the quantity demanded becomes more sensitive to price changes, reflecting a higher elasticity.
5. Conclude that the main reason price elasticity of demand generally increases over time is because consumers have more time to find substitutes and adjust their consumption habits, rather than changes in producers' pricing or supply conditions.