Question

An economist recently estimated that for every 1% increase in the price of french fries at fast-food restaurants, 0.44% fewer french fries are sold. This indicates that the demand for fast-food french fries is: elastic. perfectly inelastic. unit-elastic. inelastic.

Answer 1

The demand for fast-food french fries is inelastic.

Step-by-step explanation:

1% increase in the price of french fries at fast-food restaurants, will cause the quantity demanded of french fries will decrease by 0.44%.

The price elasticity of demand is calculated as a ratio of the percentage change in quantity demanded and percentage change in price.

Price elasticity of demand

=
`( \Delta Q)/( \Delta P)`

=
`(0.44)/(1)`

= 0.44

The price of elasticity of demand is less than 1. This implies that the price elasticity of demand is inelastic. Inelastic demand means that a change in the price level will cause a less than proportionate change in the quantity demanded.