Question

Demand for movie rentals is highly elastic. What will happen if a video store raises the price of a rental?

Answer 1

The demand for the retail (product) would decrease due to the fact that a majority of buyers would be less likely be buy a product which is of a high cost

Answer 2

The consumers would rent no movies.

Step-by-step explanation:

There is elastic demand when the price or other factors have a big effect on the quantity consumers want to buy. It is common to see this type of demand being affected especially on the price. If the price goes down, consumers would buy more. But if the price rise they would stop buying waiting for the price to go down again.

Products that have elastic demand are subjects of comparison shopping. Movie rental is highly elastic because there are several choices and are a service for recreation.

I hope this answer helps you.