Question

he price elasticity of demand for cars in Georgia is 1.8, whereas the price elasticity of demand for cars in Kentucky is 0.3. In other words, demand in Georgia is ____________ and demand in Kentucky is ________.

Answer 1

Demand for cars in Georgia is elastic (1.8), meaning consumers are responsive to price changes. In Kentucky, demand is inelastic (0.3), indicating less responsiveness to price fluctuations.

The price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

1. For Georgia (elastic demand): With a price elasticity of demand of 1.8, this suggests that demand in Georgia is elastic. A 1% change in the price of cars in Georgia would result in approximately a 1.8% change in the quantity demanded, indicating that consumers in Georgia are relatively responsive to changes in car prices.

2. For Kentucky (inelastic demand): With a price elasticity of demand of 0.3, demand in Kentucky is inelastic. A 1% change in the price of cars in Kentucky would result in approximately a 0.3% change in the quantity demanded. This indicates that consumers in Kentucky are less responsive to changes in car prices compared to those in Georgia.

Answer 2

Answer: In other words, demand in Georgia is elastic and the demand in Kentucky is inelastic.

Step-by-step explanation:

The price elasticity of demand is used to measure how the quantity of goods and services demanded react to the changes in price.

We are told that the price elasticity of demand for cars in Georgia is 1.8. This means that the demand is price elastic which means that there was a larger Chang in the quantity demanded of cars due to the change in the price of cars. Elasticity of demand here is greater than 1, therefore it is elastic.

On the other hand, the price elasticity of demand for cars in Kentucky is 0.3. This mean that it is price inelastic as the change in price has a minimal effect on the quantity of cards that were demanded. Here, the price elasticity of demand is less than 1.