Substitutes Drive Elasticity Differences

Steps:

• Recall price elasticity of demand measures responsiveness to price changes; higher elasticity means more sensitive.
• Compare markets: general coffee has few close substitutes (e.g., tea), making demand inelastic.
• For a specific brand, many substitutes exist (other brands), so consumers switch easily if price rises.
• Thus, brand demand is more elastic due to abundant alternatives.

Why B is correct:

• Elasticity increases with substitute availability; more substitutes for a brand (vs. general coffee) allow easy switching, per the law of demand.

Why the others are wrong:

• A: Higher income proportion suggests inelasticity (necessity), but general coffee is more necessary, lowering its elasticity—opposite of the question.
• C: Loyalty reduces substitutes' appeal, making brand demand less elastic, not higher.
• D: Total demand size doesn't affect elasticity; it's about responsiveness, not volume.

Final answer: B