The price elasticity of demand refers to the response of quantity demanded to a
ID: 1107331 • Letter: T
Question
The price elasticity of demand refers to the response of quantity demanded to a change in price. Which of the following is false?
Demand is said to be price inelastic when small quantity changes are observed for relatively large price changes
For normal goods, the price elasticity of demand is always negative due to the inverse relationship between price and quantity demanded
Demand is said to be elastic when quantities respond slowly to a change in price – the quantities are able to be stretched.
Price elasticity of demand is defined as the % change in quantity for a given % change in price
a.Demand is said to be price inelastic when small quantity changes are observed for relatively large price changes
b.For normal goods, the price elasticity of demand is always negative due to the inverse relationship between price and quantity demanded
c.Demand is said to be elastic when quantities respond slowly to a change in price – the quantities are able to be stretched.
d.Price elasticity of demand is defined as the % change in quantity for a given % change in price
Explanation / Answer
Answer
Option c
Demand is said to be elastic when quantities respond slowly to a change in price – the quantities are able to be stretched.
The price elasticity of demand is elastic means the quantity change is more than the change in price, which means if the quantity is responding slowly to the change in price is inelastic demand.
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