Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Elastic demand, because the quantity demanded decreased significantly with a small price increase
B
Inelastic demand, because the quantity demanded did not change at all
C
Perfectly elastic demand, as any price increase results in zero sales
D
Unit elastic demand, since the percentage change in quantity demanded equals the percentage change in price
Understanding the Answer
Let's break down why this is correct
Answer
In this situation, we can classify the demand for the bakery's cupcakes as elastic. This means that when the price of the cupcakes increased from $2 to $2. 20, the quantity demanded decreased significantly from 1000 to 900 cupcakes. Elastic demand occurs when a small change in price leads to a larger change in the quantity people are willing to buy. For example, if a shopper decides not to buy cupcakes because they are now more expensive, it shows that they are sensitive to price changes.
Detailed Explanation
When the price goes up a little and people buy a lot less, we say demand is elastic. Other options are incorrect because This answer suggests that price changes don't affect how much people buy; Perfectly elastic means that any price rise would lead to no sales at all.
Key Concepts
Demand Elasticity
Price Sensitivity
Total Revenue
Topic
Understanding Demand Elasticity
Difficulty
easy level question
Cognitive Level
understand
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