ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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People will not buy any of the product when the price goes up
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A price increase does not have a significant impact on buying habits
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Customers are sensitive to the price of the product
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There are very few satisfactory substitutes for the product
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Detailed explanation-1: -What Is Inelastic Demand? “Inelastic” is an economic term referring to the static quantity of a good or service when its price changes. Inelastic demand means that when the price goes up, consumers’ buying habits stay about the same, and when the price goes down, consumers’ buying habits also remain unchanged.
Detailed explanation-2: -Inelastic demand in economics occurs when the demand for a product doesn’t change as much as the price. A steep demand curve graphically represents inelastic demand. The steeper the curve, the more inelastic the demand for that product or service is.
Detailed explanation-3: -In case of inelastic Demand, when the price is increased, it will cause the total expenditure of the consumer to increase because total expenditure = quantity demanded × price. The demand will not change but the change in price cause consumer’s total expenditure to increase.
Detailed explanation-4: -Relatively inelastic where large changes in price cause small changes in demand (the number is less than 1). Gasoline is a good example here because most people need it, so even when prices go up, demand doesn’t change greatly.
Detailed explanation-5: -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. Unitary elasticity means that a given percentage change in price leads to an equal percentage change in quantity demanded or supplied.