The price of apples falls by 5% and quantity demanded increases by 6% This means that demand is ?
Correct answer: B. elastic
- A. zero elastic
- B. elastic
- C. perfectly elastic
- D. inelastic
Explanation
Quantity demanded changes by 6% in response to a 5% price change, giving an elasticity of 6/5, or 1.2 in absolute terms. Since this exceeds one, demand is elastic.
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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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