If a 10 Percent Rise in Price Leads to a Reduction

question 136

Multiple Choice

If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent,

• A) demand is elastic.
• B) demand is inelastic.
• C) elasticity of demand is unitary.
• D) None of the above is correct.

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Definitions:

Inelastic

describes a situation where the demand or supply for a good is not significantly affected by changes in price.

Relatively Elastic

Describes a situation where demand for a product is sensitive to changes in its price, meaning consumers will significantly reduce or increase their demand based on price changes.

Sensitive

Responsive or easily affected by external conditions or stimuli.

Economic Theory

A concept or principles developed to explain how economies work and how economic agents interact.