Question

In market A, a 4% increase in price reduces quantity demanded by 2%. In market B, a 3% increase in price reduces quantity demanded by 4%. The price elasticity of demand in market A and market B are considered______ and ______, respectively. Group of answer choices

Answer 1

Price elasticity of market A = Inelastic

Price elasticity of market B = Elastic

Step-by-step explanation:

Elasticity in the case of market A.

Given the percentage change in demand = 2%

Percentage change in price = 4%

Elasticty of demand = %Change in demand / %change in price

= 2 / 4

= 0.5 (Inelastic)

Elasticity in the case of market B.

Given the percentage change in demand = 4%

Percentage change in price = 3%

Elasticty of demand = %Change in demand / %change in price

= 4 / 3

= 1.33 (elastic)