If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is ?
Correct answer: C. price elastic
- A. income inelastic
- B. price inelastic
- C. price elastic
- D. unit price elastic
Explanation
When a small price change causes a much larger percentage change in quantity demanded, the elasticity's absolute value exceeds one. This is the definition of price-elastic demand.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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