Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Demand is considered elastic if a price increase leads to a proportionately larger decrease in quantity demanded.
B
Inelastic demand means that consumers will react strongly to price changes.
C
Demand elasticity helps businesses and policymakers predict consumer behavior in response to price changes.
D
A product with inelastic demand will see little change in quantity demanded even with significant price increases.
E
Elastic demand indicates that total revenue will always increase when prices are raised.
Understanding the Answer
Let's break down why this is correct
Answer
Demand elasticity refers to how much the quantity demanded of a good changes when its price changes. If a small change in price leads to a large change in the quantity demanded, we say the demand is elastic. For example, if the price of a popular snack increases by a little, and many people stop buying it, that shows elastic demand. Conversely, if a price change doesn’t significantly affect the quantity demanded, the demand is inelastic, like with essential medications. Understanding demand elasticity helps businesses and policymakers make better decisions about pricing and supply.
Detailed Explanation
All the statements provided misunderstand how demand elasticity works. Other options are incorrect because This statement is incorrect because it describes elastic demand correctly, but it is not true for the options given; This is wrong because inelastic demand means consumers do not change their buying much when prices go up.
Key Concepts
Demand Elasticity
Consumer Behavior
Revenue Generation
Topic
Understanding Demand Elasticity
Difficulty
easy level question
Cognitive Level
understand
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