A price elastic demand exists if a 10 percent change in the price of a good results in a percentage change (in absolute value terms) in quantity demanded that is:
A) less than 0.
B) greater than 0 but less than 10.
C) equal to 10.
D) greater than 10.

Question

Quizplus · Accepted Answer

A price elastic demand exists if the percentage change in quantity demanded is greater than the percentage change in price. So, if a 10% change in price results in a percentage change in quantity demanded that is also 10%, the demand is said to be unit elastic. If the percentage change in quantity demanded is less than the percentage change in price, then demand is said to be price inelastic. If the percentage change in quantity demanded is greater than the percentage change in price, then demand is said to be price elastic. Therefore, option D is the best choice as it indicates a high level of price elasticity, which means that a small change in price results in a relatively large change in quantity demanded.

A Price Elastic Demand Exists If a 10 Percent Change