Which one of the following is not a determinant of price elasticity of demand?

• A. Government budget deficit
• B. Time period considered
• C. Availability of close substitutes
• D. Proportion of income spent on the good

Answer: (A)

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 the common determinants of price elasticity of demand, which typically include: the availability of close substitutes, the proportion of income spent on the good, and the time period considered.
3. Analyze each option given: 'Time period considered' affects elasticity because consumers can adjust their behavior more over longer periods; 'Availability of close substitutes' affects elasticity because more substitutes make demand more sensitive to price changes; 'Proportion of income spent on the good' affects elasticity because goods that take up a larger share of income tend to have more elastic demand.
4. Recognize that 'Government budget deficit' is related to fiscal policy and macroeconomic conditions, not directly to consumer responsiveness to price changes, so it is not a determinant of price elasticity of demand.
5. Conclude that the correct answer is the option that does not influence how quantity demanded changes with price, which is 'Government budget deficit'.