Asked by Elizabeth Doqaj on Jun 06, 2024
Verified
If the price of hand calculators falls from $10 to $9 and,as a result,the quantity demanded increases from 100 to 125,then:
A) demand is elastic.
B) demand is inelastic.
C) demand is of unit elasticity.
D) not enough information is given to make a statement about elasticity.
Unit Elasticity
A situation in economics where a change in the price of a good or service results in a proportional change in the quantity demanded or supplied.
Quantity Demanded
The total amount of a good or service that consumers are willing and able to purchase at a given price within a specified time period.
- Pinpoint the conditions that classify demand as being elastic or inelastic.
Verified Answer
AS
ashish salpeJun 08, 2024
Final Answer :
A
Explanation :
The price elasticity of demand can be calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, the percentage change in quantity demanded is (125-100)/100 = 0.25 or 25%, and the percentage change in price is (9-10)/10 = -0.1 or -10%. Therefore, the elasticity of demand is 25/-10 = -2.5, which is greater than 1. This means that the demand is elastic, i.e., a small decrease in price leads to a relatively larger increase in quantity demanded.
Learning Objectives
- Pinpoint the conditions that classify demand as being elastic or inelastic.