ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Red Wing Shoes has seen a decrease in demand of 40%, while the price has increased 20%
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.5 inelastic
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.5 elastic
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2 inelastic
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2 elastic
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Explanation:
Detailed explanation-1: -If the price elasticity of demand is greater than 1, it is deemed elastic. That is, demand for the product is sensitive to an increase in price. A price increase for a fancy cut of steak, for example, may make many customers choose hamburger instead.
Detailed explanation-2: -If elasticity is greater than 1, the curve is elastic. If it is less than 1, it is inelastic. If it equals one, it is unit elastic.
Detailed explanation-3: -A product with high price elasticity of demand will see demand fall sharply when prices rise. For the product with high elasticity of demand, the downward-sloping demand curve appears flatter, and for every change in price, there is a large change to the quantity demanded.
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