Question

In which of the following product markets should we see a higher price markup?

O one with a very elastic demand
O one with lots of substitutes
O one for a commodity good
O one with few substitutes

Answer 1

The correct answer is letter "D": one with few substitutes.

Step-by-step explanation:

Price markups refer to setting the price for a good or service by adding a percentage of the costs of production and the costs of production. The result will be the price per unit of the good. Higher price markups can be charged by companies whose products have a few substitutes since consumers will not have other options from where to select to satisfy their needs.

Products with few substitutes tend to have an inelastic demand.

Answer 2

one with few substitutes

Step-by-step explanation:

The higher price markup, the higher the price, the higher the cost to consumers.

If a good has few substitutes, the demand for the good is less elastic. If price is increased, there would be little or no change in quantity demanded and the sellers profit would increase.

If a good has many substitutes, the demand for the good would be more elastic. If price is increased, Quanitity demanded would fall because consumers would shift to cheaper substitutes. Sellers profit would fall.

If demand is very elastic. It means quantity demanded is very sensitive to price. If price is increased, Quanitity demanded would fall by more than the increase in price. Sellers profit would fall.

I hope my answer helps you