If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as
A) unstable.
B) relatively inelastic.
C) relatively elastic.
D) of unitary elasticity.

Question

Quizplus · Accepted Answer

Demand is classified as relatively elastic when the percentage change in quantity demanded is greater than the percentage change in price. Here, a 20% increase in quantity demanded in response to a 10% decrease in price indicates elasticity greater than 1, which is relatively elastic.

If the Quantity Demanded Increases by 20 Percent in Response