Determinants of the price elasticity of demand
Consider some determinants of the price elasticity of demand:
? The availability of close substitutes
? Whether the good is a necessity or a luxury
? How broadly you define the market
? The time horizon being considered
A good with many close substitutes is likely to have relatively ___________(elastic,inelastic) demand, since consumers can easily choose to purchase one of the close substitutes if the price of the good rises.
A good?s price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the same, which one has the least elastic demand?
A- Diamond necklace
B- A heart valve for heart attack victims

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.

Demand is inelastic if a small change in price has little or no effect on the quantity demanded.

A good with many substitutes is likely to have an elastic demand. For example, if the price of the good increases, consumers can easily shift to a cheaper substitute.

A good that is considered necessary would have an inelastic demand. For example, the demand for water would be inelastic because water is needed for survival. Same with an heart valve for heart attack victims.

I hope my answer helps you