In the price range from $8 to $6, the demand is price elastic.

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Improve your understanding of Elasticities of Demand and Supply. This test includes multiple choice questions with explanations to get you exam-ready. Enhance your knowledge and excel on your test.

Multiple Choice

In the price range from $8 to $6, the demand is price elastic.

Explanation:
Price elasticity of demand measures how much quantity demanded responds to a price change. If the demand is elastic over a price range, the percentage change in quantity demanded is greater than the percentage change in price. Here, the price falls from $8 to $6, a 25% drop. Because the range is elastic, the quantity demanded must rise by more than 25%, so the elasticity is greater than 1. That’s why the range is described as price elastic. If it were unit elastic, the quantity would rise by exactly 25%; if inelastic, it would rise by less than 25%.

Price elasticity of demand measures how much quantity demanded responds to a price change. If the demand is elastic over a price range, the percentage change in quantity demanded is greater than the percentage change in price. Here, the price falls from $8 to $6, a 25% drop. Because the range is elastic, the quantity demanded must rise by more than 25%, so the elasticity is greater than 1. That’s why the range is described as price elastic. If it were unit elastic, the quantity would rise by exactly 25%; if inelastic, it would rise by less than 25%.

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