Suppose a 3 percent increase in price causes a 26 percent decrease in quantity demanded for a particular good. Which of the following statements is most likely applicable to this good?

a. The relevant time horizon is short.

b. The good is a necessity.

c. The market for the good is broadly defined.

d. There are many close substitutes for this good.

e. The good is a tiny part of consumers' budgets.

d. There are many close substitutes for this good

Reason: Elasticity of the good = Percentage change in quantity demanded/ percentage change in price

Elasticity = -26%/ 3% = -8.66

This shows that the good is highly price elastic. This is possible when there is large availability of substitutes for the good, so that, in case of any price change of the given good, it will cause the quantity demanded to change by a much greater amount. High elasticity of a good is not possible in case of a necessity good, goods which takes a very tiny portion of consumer's budget or market for good which is broadly defined. In all such cases the nature of good will be inelastic. However large availability of substitute goods, allows the consumer to change their consumption choices whenever there is any price change of a good.