Question

If the demand for a good is price elastic at the current market price then:?

1) i. the price elasticity is greater than one
2) ii. buyers are said to be relatively insensitive to changes in price
3) iii. total revenue will increase if price increases
4) iv. a percentage change in price will result in a smaller percentage change in quantity demanded

Answer 1

Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. Elastic demand or supply curves indicate that quantity demanded or supplied respond to price changes in a greater than proportional manner. An inelastic demand or supply curve is one where a given percentage change in price will cause a smaller percentage change in quantity demanded or supplied.

Step-by-step explanation:

Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. We compute it as the percentage change in quantity demanded (or supplied) divided by the percentage change in price. Elastic demand or supply curves indicate that quantity demanded or supplied respond to price changes in a greater than proportional manner.

An inelastic demand or supply curve is one where a given percentage change in price will cause a smaller percentage change in quantity demanded or supplied. A unitary elasticity means that a given percentage change in price leads to an equal percentage change in quantity demanded or supplied.