Question

If the price of Coca-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the demand for Coca-Cola is:

Answer 1

Relative elastic.

Explanation:

There is 10 cent increase in price, however, demand for coca-cola cans have reduced to 50 cans, which is propotionatly high.

Price elasticity of demand are percentage change in demand with percentage change in price of product. Demand has inverse relationship with price of products.

There are 4 type of price elasticity of demand:

• Perfectly elastic demand.
• Perfectly inelastic demand.
• Relatively elastic demand.
• Relatively inelastic demand.

Perfectly elastic demand: Small change in price lead to greater change in demand of products.

Perfectly inelastic demand: No change in demand of product with changes in price of product.

Relatively elastic demand: Propotionatly greater change in demand with propotionatly lesser change in price of product.

Relatively inelastic demand: Percentage change in demand is lesser than percentage change in price of product.