If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:
A) product A is more elastic than product B.
B) product B is more elastic than product A.
C) consumers are more responsive to price changes in product A than in product B.
D) products A and B must be substitutes.

Question

Quizplus · Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. A higher elasticity (greater than 1) indicates that consumers are more responsive to price changes, making product B more elastic than product A since 1.6 is greater than .79.

If the Price Elasticity of Demand Is Computed for Two