Question

"The pizza delivery business in this town is very competitive.

I’d lose half my customers if I raised the price by as little as
5%." This would be an example of elastic demand.
A) True
B) False

Answer 1

The statement exemplifies elastic demand, which is characterized by quantity demanded being highly sensitive to changes in price, making the answer A) True.

Step-by-step explanation:

The statement "I'd lose half my customers if I raised the price by as little as 5%." indicates that the demand for the pizza in this town is highly sensitive to price changes, which is an example of elastic demand. Therefore, the answer to the question is A) True. Elastic demand occurs when the percentage change in quantity demanded is greater than the percentage change in price. For instance, if the price of a product were to increase by 5%, and the demand decreased by more than 5% as a result, the demand would be considered elastic. In a highly competitive market like pizza delivery, customers have many alternatives and are more likely to switch to another supplier if prices increase even slightly.