Suppose the Price of a Good Is $10 and Quantity

question 45

Multiple Choice

Suppose the price of a good is $10 and quantity demanded is 50 units. When price increases to $12, quantity demanded decreases to 40 units. What does this indicate?

• A) The quantity effect is larger than the price effect, indicating that demand is inelastic.
• B) The quantity effect is larger than the price effect, indicating that demand is elastic.
• C) The price effect is larger than the quantity effect, indicating that demand is inelastic.
• D) The price effect is larger than the quantity effect, indicating that demand is elastic.

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