Question

The reason a brand name item (e.g., Tyson chicken) has a larger price elasticity than a class or a broad group of items (e.g., chicken) is that:

a) There are fewer substitutes for Tyson chicken.
b) There are more substitutes for Tyson chicken.
c) Brand name items are always cheaper.
d) Price elasticity is not related to brand names.

Answer 1

Brand name items have a larger price elasticity than a class or a broad group of items because there are more substitutes available.

Step-by-step explanation:

The reason a brand name item has a larger price elasticity than a class or a broad group of items is because there are more substitutes available for brand name items. When there are close substitutes available, the demand for a product becomes more elastic because consumers can easily find an alternate product instead of paying a higher price.