Which factor would tend to increase the elasticity of demand the most?

Which factor would tend to increase the elasticity of demand the most?

• A. Fewer substitutes
• B. Higher proportion of income spent
• C. Faster, shorter time to respond
• D. Brand loyalty

Answer: (C)

Elasticity of demand shows how much buyers change the quantity they buy when the price changes. The bigger the chance to adjust what you buy, the more sensitive you are to price changes, so elasticity is higher. Time is a big driver here: in the long run, people have more opportunities to switch to substitutes, change how they spend their money, or cut back on purchases, which makes demand more elastic than in the short run. So, the factor that increases elasticity the most is having more time to respond to price changes. The idea that you respond quickly (a faster, shorter time to respond) would usually mean there’s less time to adjust, which tends to make demand less elastic, not more. Other factors—fewer substitutes, brand loyalty—also tend to reduce elasticity, while a higher share of income spent on the good tends to increase it because price changes hit the budget harder.

Elasticity of demand shows how much buyers change the quantity they buy when the price changes. The bigger the chance to adjust what you buy, the more sensitive you are to price changes, so elasticity is higher. Time is a big driver here: in the long run, people have more opportunities to switch to substitutes, change how they spend their money, or cut back on purchases, which makes demand more elastic than in the short run. So, the factor that increases elasticity the most is having more time to respond to price changes.

The idea that you respond quickly (a faster, shorter time to respond) would usually mean there’s less time to adjust, which tends to make demand less elastic, not more. Other factors—fewer substitutes, brand loyalty—also tend to reduce elasticity, while a higher share of income spent on the good tends to increase it because price changes hit the budget harder.