Which is characteristic of a product with elastic demand? A. The good is regarded by consumers as a necessity B. There are a large number of good substitutes for the good C. Buyers spend a small percentage of their total income on the product D. Consumers have had only a short time period to adjust to changes in price
Which is characteristic of a product with elastic demand? A. The good is regarded by consumers as a necessity B. There are a large number of good substitutes for the good C. Buyers spend a small percentage of their total income on the product D. Consumers have had only a short time period to adjust to changes in price
Chapter20: Elasticity: Demand And Supply
Section: Chapter Questions
Problem 5E
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Question
Which is characteristic of a product with
A. The good is regarded by consumers as a necessity
B. There are a large number of good substitutes for the good
C. Buyers spend a small percentage of their total income on the product
D. Consumers have had only a short time period to adjust to changes in price
Expert Solution
Step 1
Price elasticity is a tool that measures how responsive the change in quantity demanded is to a change in price. A good with a high price elasticity of demand means that a small change in price leads to a large change in quantity demanded, while a low price elasticity means that a change in price has little effect on the quantity demanded. It is an important concept for businesses and policymakers, as it helps them understand how changes in price will impact demand and revenue.
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