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The price of product X is reduced from $120 to $100 and, as a result, the quantity demanded increases from 10 to 13 units. Therefore, demand for X in this price range:_____.
a. has declined.
b. is of unit elasticity.
c. is inelastic.
d. is elastic.

Sagot :

Parrain

Answer: d. is elastic.

Explanation:

A good is said to be elastic when its price elasticity of demand is greater than one.

Price elasticity of demand shows the change in quantity demanded as a result of a change in price.

Formula is:

= Percentage change in quantity demanded / Percentage change in price

Percentage change in price = (100 - 120) / 120 = -16.7%

Percentage change in quantity demanded = (13 - 10) / 10 = 30%

Price elasticity of demand = 30% / -16.7%

= -1.8

Price elasticity of demand is greater than the number 1 so this is elastic.

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