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Demand is elastic, as the percentage change in quantity demanded is greater than the percentage change in price.
Demand is inelastic, as the quantity demanded remains unchanged regardless of price.
Demand is unitary elastic, as the percentage change in quantity demanded equals the percentage change in price.
Demand is perfectly inelastic, as consumers are willing to buy the lattes at any price.
Understanding the Answer
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Elasticity measures how much quantity changes when price changes. Other options are incorrect because The idea that quantity stays the same is called inelastic demand, but here the quantity fell; Unitary elasticity would mean the percentage change in quantity equals the percentage change in price.
Key Concepts
Price Elasticity of Demand
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Definition
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It quantifies how much the quantity demanded will change in percentage terms in response to a one percent change in price. Elasticity values help determine the sensitivity of demand to price fluctuations.
Topic Definition
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It quantifies how much the quantity demanded will change in percentage terms in response to a one percent change in price. Elasticity values help determine the sensitivity of demand to price fluctuations.
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