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The source names life-saving drugs and gasoline as goods likely to have highly inelastic demand curves. What trait does it give as the reason?
AThey have many close substitutes available
BTheir production costs fall as output rises
CThey are necessities with no close substitutes
DThey take up a very small share of a household's budget
Answer & Solution
Correct answer: C. They are necessities with no close substitutes
1. The source connects highly inelastic demand to necessities that have no close substitutes.
2. Life-saving drugs and gasoline are given as examples of this kind of necessity.
3. Having many substitutes pushes demand toward elastic, the opposite of what is described here.
4. Budget share is discussed elsewhere as a driver of elastic demand for luxury goods, not as the reason given for these inelastic examples.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 5 "Elasticity", section 5.2 | Polar Cases of Elasticity and Constant Elasticity_
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