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

• A. Government subsidies to producers
• B. Production technology
• C. Availability of close substitutes
• D. 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; production technology influences supply side as well; number of sellers affects market supply, not demand elasticity.
4. Recognize that the availability of close substitutes makes consumers more responsive to price changes because they can easily switch to alternatives, increasing the price elasticity of demand.
5. Conclude that among the given options, the availability of close substitutes is a key determinant of the price elasticity of demand.