If the price elasticity of demand for grapes was 2.5,
A) the demand for grapes would be considered inelastic.
B) an increase in the price of grapes would decrease total consumer spending on grapes.
C) consumer purchases are less sensitive to a change in the price of grapes than to a change in the price of bananas, which have a price elasticity of 1.6.
D) the income elasticity for grapes must also be 2.5.

Question

Quizplus · Accepted Answer

A price elasticity of demand of 2.5 indicates that the demand for grapes is relatively elastic, meaning that a change in price will have a significant impact on the quantity demanded. This means that an increase in the price of grapes will decrease total consumer spending on grapes, as consumers will be less willing to purchase the same quantity of grapes at a higher price. Option A is incorrect because an elasticity of 2.5 indicates that demand is elastic, not inelastic. Option C is incorrect because the price elasticity of bananas is irrelevant to the demand for grapes. Option D is incorrect because the income elasticity of demand measures the relationship between changes in income and changes in quantity demanded, and is not necessarily related to the price elasticity of demand.

If the Price Elasticity of Demand for Grapes Was 2