Which of the following is a determinant of the price elasticity of demand?

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

Answer: (B)

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 determinants of price elasticity of demand are factors that influence how sensitive consumers are to price changes.
3. Identify that the availability of close substitutes is a key determinant because when many close substitutes exist, consumers can easily switch if the price changes, making demand more elastic.
4. Recognize that factors like the number of sellers, government taxation, and production technology affect supply or market structure but do not directly determine the price elasticity of demand.
5. Conclude that among the options given, the availability of close substitutes is the correct determinant of the price elasticity of demand.