Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Willingness to spend
B
Ability to save
C
Price stability
D
Market saturation
Understanding the Answer
Let's break down why this is correct
Answer
Price elasticity of demand is a measure of how much the amount people buy changes when the price changes. Consumer confidence is a measure of how optimistic people feel about the economy and their own financial situation. Just as elasticity tells us how responsive buying is to price, consumer confidence tells us how responsive spending is to feelings about the future. For example, when confidence is high, people are more likely to buy more and spend more, just as a high elasticity means people will buy more when prices drop. Thus, consumer confidence is to consumer spending what price elasticity of demand is to quantity demanded.
Detailed Explanation
Price elasticity tells how much people buy when the price changes. Other options are incorrect because People might think saving ability matters, but elasticity is about spending, not saving; Price stability is about how prices stay the same, not how people react.
Key Concepts
Price Elasticity of Demand
Consumer Behavior
Market Dynamics
Topic
Price Elasticity of Demand
Difficulty
easy level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1How does the price elasticity of demand affect total revenue when the price of a product decreases?
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2
Question 2A company notices that when they increase the price of their product by 10%, the quantity demanded decreases by 20%. How can the company use this information regarding price elasticity of demand to make strategic pricing decisions in the future?
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3
Question 3How does a price elasticity of demand greater than 1 affect consumer behavior when prices increase?
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4
Question 4If the price of a luxury car increases by 10% and the quantity demanded decreases by 15%, what does this indicate about the price elasticity of demand?
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5
Question 5Which of the following statements accurately describe price elasticity of demand? Select all that apply.
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Practice
6
Question 6The __________ of demand measures the responsiveness of quantity demanded to a change in price, indicating how much the quantity demanded will change in percentage terms in response to a one percent change in price.
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