Answer to Question #201744 in Economics of Enterprise for Ali Kilponen

Question

If a 7 percent increase in price results in a _____ percent _____ in quantity demanded, everything else held constant, then it can be concluded that demand is price inelastic.

Select one:

A.

7; decrease

B.

less than 7; increase

C.

greater than 7; decrease

D.

less than 7; decrease

E.

greater than 7; increase

F.

7; increase

Answer 1

Demand is said to be price inelastic if a change in price causes a smaller change in demand. Therefore the correct answer is:

D. less than 7; decrease,

i.e 7 percent increase in price results in a less than 7% decrease in quantity demanded, everything else kept constant for.