We say that a good has elastic demand whenever the absolute value of the price elasticity of demand is greater than 1. A 1 percent change in price therefore causes
A) exactly a 1 percent change in the quantity demanded.
B) a change of less than 1 percent in the quantity demanded.
C) a greater than 1 percent change in quantity demanded.
D) a change that cannot be determined based on 1 percent.

Question

Quizplus · Accepted Answer

If the absolute value of the price elasticity of demand is greater than 1, a 1 percent change in price will cause a greater than 1 percent change in quantity demanded. This means that the quantity demanded is very responsive to changes in price, and small price changes can cause large shifts in the quantity demanded.

We Say That a Good Has Elastic Demand Whenever the Absolute