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

• A. Government subsidies to producers
• B. The cost of production
• C. The availability of close substitutes
• D. The number of sellers in the market

Answer: (C)

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. Evaluate each option: Government subsidies to producers affect supply, not demand elasticity; the cost of production influences supply decisions, not demand elasticity; the number of sellers in the market affects market supply, not demand elasticity.
4. Recognize that the availability of close substitutes directly affects consumers' willingness to switch products when the price changes, making demand more elastic.
5. Conclude that among the options given, the availability of close substitutes is a key determinant of the price elasticity of demand.