A necessity with few substitutes tends to have which level of price elasticity of demand?

• A. High elasticity
• B. Moderate elasticity
• C. Low elasticity
• D. Infinite elasticity

Answer: (C)

Price elasticity of demand measures how much the quantity demanded changes in response to a price change. For a necessity with few substitutes, people still need to buy it even if the price goes up, and there aren’t easy alternatives to switch to. That limited ability to substitute keeps the quantity demanded from dropping much when prices rise, so the elasticity is low (inelastic).

In contrast, a high elasticity would occur if there were many close substitutes or if the good were a luxury, so buyers could significantly reduce consumption when price increases. An infinite elasticity would imply a perfect response where any price rise drives quantity to zero, which doesn’t describe a true necessity. A moderate elasticity describes goods with some substitutes or less essential status, where quantity responds to price changes but not dramatically.