Question

From the following quotations, what, if anything, can you conclude about the elasticity of demand? (Elastic, unit elastic, inelastic, can't be determined by quotation). "As the price of cell phones fell, producers found their revenues soaring"

Answer 1

The quotation indicates an elastic demand for cell phones, as the price decrease led to a significant increase in demand and revenue for the producers.

Step-by-step explanation:

The quotation "As the price of cell phones fell, producers found their revenues soaring" indicates an elastic demand for cell phones. Elastic demand means that the quantity demanded is highly responsive to changes in price. In this case, as the price of cell phones decreased, the demand increased significantly, resulting in a soaring revenue for the producers. This suggests that the elasticity of demand for cell phones is greater than one, and it is elastic.