If the demand for American automobiles is more elastic in Europe than it is in the United States, we might expect
A) the same price for autos in the United States and Europe.
B) a higher price for autos in the United States than in Europe.
C) a lower price for autos in the United States than in Europe.
D) a less profitable price for autos in the United States than in Europe.
E) a price in Europe that is less than the cost of producing the car in Europe.

Question

Quizplus · Accepted Answer

When demand is more elastic, consumers are more sensitive to price changes, meaning they are likely to buy significantly less if prices rise. To maintain or increase sales in a market with more elastic demand (Europe, in this case), sellers might set lower prices there than in a market with less elastic demand (the United States), where consumers are less sensitive to price changes. This could lead to a higher price for autos in the United States than in Europe.

If the Demand for American Automobiles Is More Elastic in Europe