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?

-Diamond necklace

-A heart valve for heart attack victims

The price elasticity of demand for a good also depends on how you define the good.

Organize the goods found in the following table by indicating which is likely to have the most elastic demand, which is likely to have the least elastic demand, and which will have demand that falls in between.

The availability of close substitutes - because the more substitutes a good has, the more elastic it is.
Whether the good is a necessity or a luxury - because necessities tend to be more inelastic than luxury, however, if a necessitie has many substitutes, it will still be elastic.

The answer for the second question is "likely to have relatively elastic demand". A good with elastic demand is a good whose demand changes a lot when the price changes. Consider sodas for example. A soda of a particular brand has many substitutes, and if the price of, for example, coca cola goes up, people can still buy pepsi, or sprite, or mountain dew, then, the demand for coca cola will fall.

For the third question, the answer is "a heart valve for heart attack victims", because this type of medical device is highly complex and practically has no substitutes, besides, it is a vital necessity. Even if the price rises 100% in one month, a patient will still do as much as possible to buy it.