Question

If price increases by 12 percent and quantity demanded decreases by 12 percent, demand is:

- inelastic
- elastic
- unit-elastic

Answer 1

When both price and quantity demanded change by the same percentage, the demand is unit-elastic. In this scenario of a 12% increase in price and a 12% decrease in the quantity demanded, demand is unit-elastic, with a price elasticity of demand of 1.

Step-by-step explanation:

If the price increases by 12 percent and the quantity demanded decreases by 12 percent, the demand is considered unit-elastic. This means that the percentage change in demand is exactly the same as the percentage change in price. A unit elastic demand is one where a given percentage change in price leads to an equal percentage change in quantity demanded. Therefore, in this case, since the percentage increase in price is exactly matched by the percentage decrease in demand, the price elasticity of demand is 1.

Answer 2

inelastic

Step-by-step explanation:

Price elasticity of demand = percentage change in quality /percentage change in price

-12/12=-1

This tells us that it is a relatively large price change in order to cause a relatively small change in quantity demanded. In other words consumer responsiveness to change is relatively small so it is inelastic