Which of the following is NOT a determinant of the price elasticity of demand?

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

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 for adjustment.
3. Analyze each option to see if it directly affects consumers' responsiveness to price changes: 'Availability of close substitutes' affects elasticity because more substitutes mean consumers can switch easily, increasing elasticity.
4. '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.
5. 'Time period considered' affects elasticity because consumers may respond more to price changes over longer periods, making demand more elastic over time, whereas 'Government tax revenue' is not a direct determinant of how quantity demanded responds to price changes.