If a 1 Percent Decrease in Price Results in Less

question 10

Multiple Choice

If a 1 percent decrease in price results in less than a 1 percent increase in the quantity demanded, demand is

• A) cross-price elastic.
• B) price inelastic.
• C) price elastic.
• D) status quo elasticity.
• E) derived demand inelastic.

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Definitions:

Price

The financial value forecasted, demanded, or handed over as compensation for an item.

Quantity

The amount or number of a material or immaterial good that is considered as a unit or an aggregate.

Price Ceiling

A legal maximum price set by government on certain goods or services, intended to prevent prices from becoming too high.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or a service is not achieved, leading to a misallocation of resources.