Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The product has elastic demand.
B
The product has inelastic demand.
C
The product is a luxury good.
D
The product is a necessity.
Understanding the Answer
Let's break down why this is correct
Answer
When the price of a product drops significantly and people buy much more of it, we can say that the demand for that product is elastic. This means that consumers are very sensitive to price changes; a small decrease in price leads to a big increase in how much they want to buy. For example, if the price of a popular video game falls from $60 to $30, and sales go from 100,000 to 300,000 copies, this shows a strong response to the price change. The relationship indicates that consumers see the lower price as a great opportunity to purchase more. Therefore, we can conclude that the price elasticity of demand for that product is greater than one, which reflects that demand is elastic.
Detailed Explanation
When the price drops a lot and people buy much more, it shows that demand is elastic. Other options are incorrect because Inelastic demand means that price changes do not affect how much people buy; A luxury good is something people want but don't need.
Key Concepts
Price Elasticity of Demand
Consumer Behavior
Total Revenue
Topic
Elasticity Formulas and Relationships
Difficulty
hard level question
Cognitive Level
understand
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