The price elasticity of demand for eggs is −0.27 and the price elasticity of demand for soft drinks is −0.70. Therefore, the demand for eggs:
A) is more elastic than the demand for soft drinks.
B) is less elastic than the demand for soft drinks.
C) cannot be compared to the demand for soft drinks because both have negative price elasticities.
D) cannot be compared to the demand for soft drinks because eggs cannot be substituted for soft drinks.

Question

Quizplus · Accepted Answer

The magnitude of the price elasticity of demand indicates the responsiveness of quantity demanded to a change in price. The larger the absolute value of the elasticity, the more elastic the demand. Since the price elasticity of demand for soft drinks (-0.70) is greater in absolute value than the price elasticity of demand for eggs (-0.27), it means that the demand for soft drinks is more responsive to a change in price than the demand for eggs. Therefore, option B is correct.

The Price Elasticity of Demand for Eggs Is −0