Why is demand for a broad category, such as shoes in general, typically less price elastic than demand for one specific brand and model?
Correct Answer
D) Because there are few substitutes for the whole category
If all shoes cost more, there are few substitutes for shoes, so buyers keep buying. A specific model has many substitutes, so demand for it is more price elastic.
Why This Is the Correct Answer
Option D is correct because there are few substitutes for a whole category such as shoes. If all shoes cost more, most buyers still buy shoes, so demand for the category is less price elastic than demand for a single model with many alternatives.
Why the Other Options Are Wrong
Option A: Because a category has fewer buyers than one specific model
Option A, that a category has fewer buyers than one specific model, is wrong because a category includes the buyers of all the models in it, so it has more buyers, not fewer. Elasticity here depends on substitutes, not buyer count.
Option B: Because category prices are set by regulation
Option B, that category prices are set by regulation, is wrong because ordinary product categories like shoes are not price-regulated. Elasticity comes from buyer responsiveness, not regulation.
Option C: Because specific models are necessities for buyers
Option C, that specific models are necessities for buyers, is wrong because a specific model is rarely a necessity; buyers can choose another model. If anything, that would make the specific model less elastic, which contradicts the premise.
More substitutes, more stretch
Elastic demand stretches when buyers can switch; a whole category leaves little to switch to.
How to use: Use this when comparing the elasticity of a broad category with that of one specific product.
Exam Tip
When elasticity is the topic, look first for the answer that mentions substitutes.
Common Mistakes to Avoid
- -Confusing number of buyers with availability of substitutes
- -Thinking specific models are less elastic than whole categories
- -Attributing elasticity differences to regulation
Concept Deep Dive
Analysis
This question tests the link between substitutes and price elasticity of demand. When an entire category becomes more expensive, buyers have few alternatives, so quantity demanded changes little. A specific brand and model has many close substitutes, so buyers switch easily when its price rises.
Background Knowledge
Price elasticity of demand measures how much quantity demanded responds to a price change. The availability of close substitutes is a major determinant: more substitutes mean more elastic demand. In real estate, a specific property type in a narrow area may face many substitutes, while housing as a whole has few.
Real-World Application
If one subdivision's builder raises prices sharply, buyers can shift to similar new homes nearby, so that builder's sales fall quickly. If housing costs rise across the whole region, buyers have fewer alternatives and many still buy. An appraiser considers how many competing substitutes exist when judging the subject's marketability.
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