Question

Will, a sprinter on the track team, has an inelastic demand for sports drinks. The local store has raised the price of a sports drink from $1.00 to $1.50. Which statement could describe Will’s response to the price change?

He bought 10 bottles a month at $1.00 and 8 bottles a month at $1.50.





He bought 10 bottles a month at $1.00 and 5 bottles a month at $1.50.





He bought 15 bottles a month at $1.00 and 5 bottles a month at $1.50.





He bought 15 bottles a month at $1.00 and 20 bottles a month at $1.50.

Answer 1

He bought 10 bottles a month at $1.00 and 8 bottles a month at $1.50.

Step-by-step explanation:

The price elasticity of demand (PED) measures how the quantity demanded of a product or services changes when its price changes by 1%.

• PED > 1 price elastic. This means that a 1% change in the price will result in a proportionally larger change in the quantity demanded.
• PED < 1 price inelastic. This means that a 1% change in the price will result in a proportionally smaller change in the quantity demanded. In this case, the price of the sports drink increased by 50%, but the demand decreased by only 20%, meaning that the PED is price inelastic (PED = 0.4).
• PED = 1, price unitary. This means that a 1% change in the price will result in a proportionally equal change in the quantity demanded.

Answer 2

He bought 10 bottles a month at $1.00 and 8 bottles a month at $1.50.

Explanation:

Remember, inelastic demand is a demand scenario where the change in price of a commodity results in little changes in the in the demand for that commodity by buyers.

Therefore, Will was affected in a very little way as the price of the sports drink changed from $1.00 to $1.50, that is why he purchased 8 bottles a month even at $1.50.