The price elasticity of demand for bottled water in Texas is -2, and the price elasticity of demand for bottled water in California is -0.5. In other words, demand in Texas is ________, and demand in California is ________.
A) elastic; inelastic
B) inelastic; elastic
C) elastic; unit elastic
D) inelastic; unit inelastic

Question

Quizplus · Accepted Answer

The price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in price. A value less than -1 indicates elastic demand, meaning consumers are responsive to price changes. A value between 0 and -1 indicates inelastic demand, meaning consumers are less responsive to price changes. Therefore, with an elasticity of -2, demand in Texas is elastic, and with an elasticity of -0.5, demand in California is inelastic.

The Price Elasticity of Demand for Bottled Water in Texas