If demand is price elastic, what is the result of a 1% decrease in price?

If demand is price elastic, what is the result of a 1% decrease in price?

• A. The quantity demanded increases by more than 1%.
• B. The quantity demanded increases by less than 1%.
• C. The quantity demanded decreases.
• D. There is no change in quantity demanded.

Answer: (A)

Price elasticity of demand shows how much quantity demanded responds to a price change. When demand is price elastic, the percentage change in quantity demanded is larger than the percentage change in price in absolute value. So a 1% decrease in price (. price falls by 1%) leads to a rise in quantity demanded that exceeds 1%. In other words, the quantity demanded increases by more than 1%. The other options would describe no change, a decrease, or a smaller response, which wouldn’t align with elastic demand.

Price elasticity of demand shows how much quantity demanded responds to a price change. When demand is price elastic, the percentage change in quantity demanded is larger than the percentage change in price in absolute value. So a 1% decrease in price (. price falls by 1%) leads to a rise in quantity demanded that exceeds 1%. In other words, the quantity demanded increases by more than 1%. The other options would describe no change, a decrease, or a smaller response, which wouldn’t align with elastic demand.