iCore Marketing Practice Exam 2026 - Free Marketing Practice Questions and Study Guide

The increase in price elasticity of demand is significantly influenced by the availability of substitutes. When consumers have various alternatives to choose from, they can easily switch to a substitute product if the price of a particular good rises. This responsiveness reflects a higher price elasticity of demand, as consumers are more likely to alter their purchasing behavior in reaction to price changes.

For instance, if the price of brand A's soda increases but there are many other brands of soda available that consumers find similarly appealing, it is likely that they will choose a different brand rather than continue purchasing the more expensive option. The greater the number of substitutes available, the more elastic the demand becomes because consumers have options and are less bound to any single product.

In contrast, high brand loyalty can lead to lower price elasticity, as loyal customers may be willing to pay higher prices for their preferred brand. Consumer necessity typically results in inelastic demand, as essential items must be purchased regardless of price changes. Likewise, low consumer awareness might decrease elasticity since uninformed consumers may not recognize substitute products or their price variations, leading to less sensitivity to price changes.