Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A product with high elasticity will see a significant change in quantity demanded when its price changes.
B
Elasticity is only relevant for luxury goods and has no impact on essential goods.
C
Understanding elasticity helps predict how taxes will affect consumer behavior.
D
A perfectly inelastic demand means that quantity demanded does not change regardless of price changes.
E
Elasticity is not influenced by the availability of substitutes.
Understanding the Answer
Let's break down why this is correct
Answer
Elasticity in market dynamics refers to how much the quantity demanded or supplied of a good changes in response to a change in price. If a small price change leads to a big change in quantity demanded, we say the demand is elastic. For example, if the price of a favorite snack increases significantly, many people might stop buying it, showing that demand is sensitive to price changes. On the other hand, if the price of something essential, like medicine, changes slightly and people continue to buy it, that demand is considered inelastic. Understanding elasticity helps businesses and policymakers make better decisions about pricing and supply.
Detailed Explanation
Other options are incorrect because This statement is incorrect; This is a common misunderstanding.
Key Concepts
Elasticity of Demand
Market Behavior
Price Sensitivity
Topic
Elasticity in Market Dynamics
Difficulty
medium level question
Cognitive Level
understand
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