Q. The price elasticity of demand for a good depends on:

1. The nature of the good
2. The availability of close substitutes of the good.

Which of the above is / are correct?
Answer: Both 1 and 2
Notes: Both determine the price elasticity of demand for a good. The price elasticity of demand for a good depends on the nature of the good and the availability of close substitutes of the good. Consider, for example, necessities like food. Such goods are essential for life and the demands for such goods do not change much in response to changes in their prices.