In price elasticity analysis, what does a price elasticity of demand coefficient with an absolute value greater than one (|Ed| > 1) indicate?
Answer and explanation
Correct answer: D. Demand is price elastic
- Step 1: When the absolute value of price elasticity is greater than one, the percentage change in quantity demanded is larger than the percentage change in price, signifying elastic demand. Answer: Demand is price elastic. Why not the others: Inelastic demand has an elasticity less than one, unit elastic equals exactly one, and perfectly inelastic equals zero.
Practise more Microeconomics, Business Operations, Financial Management and the Macroeconomic Environment.
Free questions with an explanation for every one, and full timed Poklicna matura (Vocational Matura Slovenia) mock tests.
More Microeconomics, Business Operations, Financial Management and the Macroeconomic Environment questions
- In microeconomics, what fundamental economic concept describes the value of the next best alternative forgone when making a decision?
- In market analysis, what effect does an increase in the market price of a normal good generally have on consumer demand, ceteris paribus?
- In microeconomic theory, what is the term for a market structure characterized by a single seller supplying a unique product with no close s…
- In business production, which of the following is classified as a fixed cost in the short run?
- In economic analysis, at what point is market equilibrium achieved in a competitive market for consumer goods?
- In cost accounting, how is average total cost calculated for a manufacturing enterprise?