Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The product is a necessity
B
The product is elastic
C
The product has no substitutes
D
The product's demand is inelastic
Understanding the Answer
Let's break down why this is correct
Answer
A price elasticity of demand greater than 1 means that the demand for a product is elastic, which means that consumers are very responsive to changes in price. When the price of the product goes up, the quantity demanded decreases significantly, and when the price goes down, the quantity demanded increases a lot. For example, if the price of a popular brand of sneakers increases by 10% and the quantity demanded drops by 15%, this shows that people are willing to buy much less when the price rises. This kind of product often has many substitutes, so if the price goes up, consumers can easily switch to a different option. Understanding this helps businesses make better decisions about pricing to maximize their sales and profits.
Detailed Explanation
When demand is elastic, it means people buy a lot more or a lot less when the price changes. Other options are incorrect because Some might think that a product with high demand is a necessity; It's a common mistake to think that having no substitutes means demand is elastic.
Key Concepts
price elasticity of demand
Topic
Elasticity in Market Dynamics
Difficulty
easy level question
Cognitive Level
understand
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