If there are many substitutes, slight price increase (or decrease) will cause people to demand substantially less (or more) of that good—elastic goods prefer price decrease, in terms of total revenue in comparison with other goods (e.g., 1% increase in price causes a more than 1% decrease in quantity demanded), and vice versa for inelastic goods whose demand curve is steeper.
“The law of the interrelation of consumers’ goods is: The more substitutes there are available for any given good, the more elastic will tend to be the demand schedules (individual and market) for that good.”
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- 13-9b1 The closeness of the substitution does not exist objectively, but only subjectively in the minds of consumers
- 13-9c The more diverse an economy, the less likely it is that any good remains truly inelastic
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