Answer to Question #216571 in Economics for Paballo

Question

Which one of the following statements with regards to price elasticity is correct?

A. If you know what the price elasticity of petrol is, all you will be able to say is that an increase in the price of petrol will reduce the quantity of petrol demanded.

B. If the price elasticity of good X is greater than the price elasticity of good Y, it means that households are more responsive or sensitive to a change in the price of good Y than to a change in the price of good X.

C. If you know what the price elasticity of petrol is, you will know how sensitive or responsive the quantity demanded of petrol is to a change in the price of petrol.

D. The price elasticity of demand provides us with a measure of how sensitive or responsive the price of a good or service is to a change in demand.

Answer 1

B. If the price elasticity of good X is greater than the price elasticity of good Y, it means that households are more responsive or sensitive to a change in the price of good Y than to a change in the price of good X.