Question

Which of the following is true of price elasticity of demand?

A. The price elasticity of demand is only defined by the competitive conditions in a country.
B. Demand is said to be inelastic when a large change in price produces a large change in demand.
C. Demand is said to be elastic when a large change in price produces a small change in demand.
D. Price elasticity tends to be greater in countries with low income levels.

Answer 1

Answer: Option c

Step-by-step explanation: Elasticity is an economic term that describes a transition in consumer and vendor actions in response to a price change for a commodity. How the market for the commodity responds to a price change dictates the elasticity or in-elasticity of the demand for that product.

An inelastic commodity is the one that even after a price change, buyers continue to buy. A good or service's elasticity may change depending on the number of close alternatives accessible, its overall cost, and the length of time that has passed since the increase in price occurred.

Thus even if there is a slight change in demand due to change in price then the commodity is said to be elastic.