If demand is price elastic, what is the result of a 1% decrease in price?

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Explore Elasticities of Demand and Supply Test. Enhance understanding with multiple-choice questions and detailed explanations. Start your journey to mastering economic principles!

Multiple Choice

If demand is price elastic, what is the result of a 1% decrease in price?

Explanation:
Price elasticity of demand shows how much quantity demanded responds to a price change. When demand is price elastic, the percentage change in quantity demanded is larger than the percentage change in price in absolute value. So a 1% decrease in price (. price falls by 1%) leads to a rise in quantity demanded that exceeds 1%. In other words, the quantity demanded increases by more than 1%. The other options would describe no change, a decrease, or a smaller response, which wouldn’t align with elastic demand.

Price elasticity of demand shows how much quantity demanded responds to a price change. When demand is price elastic, the percentage change in quantity demanded is larger than the percentage change in price in absolute value. So a 1% decrease in price (. price falls by 1%) leads to a rise in quantity demanded that exceeds 1%. In other words, the quantity demanded increases by more than 1%. The other options would describe no change, a decrease, or a smaller response, which wouldn’t align with elastic demand.

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