Economics · Elasticity of Demand
Evaluate the following regarding the elasticity of demand for banking products. Statement I: The price elasticity of demand for essential savings accounts is likely to be highly inelastic because there are few close substitutes for basic financial safety. Statement II: If the income elasticity of demand for a premium wealth management service is 2.5, it is classified as a luxury good. Statement III: The demand for credit cards is likely to be more elastic in the long run than in the short run because consumers have more time to find alternatives or adjust their spending habits. Statement IV: For a perfectly competitive bank, the demand curve for its specific personal loan product would be perfectly inelastic. Which of the following describes the validity of these statements?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1All statements are correct except Statement II.
- 2Only Statement II and Statement IV are correct.
- 3Statement I and II are correct; Statement III and IV are incorrect.
- 4Statement I, II, and III are correct; Statement IV is incorrect.✓
Correct answer
Statement I, II, and III are correct; Statement IV is incorrect.
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