Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Demand is elastic and consumers are sensitive to price changes
B
Demand is inelastic and consumers are not sensitive to price changes
C
Demand is unitary elastic
D
Demand is perfectly inelastic
Understanding the Answer
Let's break down why this is correct
Answer
When the price elasticity of demand is greater than 1, it means that consumers are very responsive to changes in price. This situation is often referred to as elastic demand. For example, if the price of a popular brand of sneakers increases by 10%, and as a result, the quantity demanded decreases by 20%, the price elasticity of demand would be 2, which is greater than 1. This indicates that people are willing to buy much less of the sneakers when the price goes up, showing they can easily choose alternatives. In general, goods that are not necessities or have many substitutes tend to have a price elasticity of demand greater than 1.
Detailed Explanation
When the price elasticity of demand is greater than 1, it means that consumers react strongly to price changes. Other options are incorrect because Some might think that a high elasticity means consumers don’t care about price; Unitary elastic means demand changes exactly with price changes.
Key Concepts
price elasticity of demand
Topic
Understanding Demand Elasticity
Difficulty
easy level question
Cognitive Level
understand
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