Assume the demand for a good is price inelastic,i.e.,ed

Question

Assume the demand for a good is price inelastic,i.e.,ed < 1 (in absolute value).This means that if price decreases by 50 percent,quantity demanded will:
A)increase by more than 50 percent.
B)decrease by more than 50 percent.
C)increase by less than 50 percent.
D)decrease by less than 50 percent.

Quizplus · Accepted Answer

Since the demand for the good is price inelastic (ed < 1), a 50 percent decrease in price will lead to a proportionally smaller increase in quantity demanded. The magnitude of the increase in quantity demanded will be less than the magnitude of the decrease in price. Therefore, the correct answer is C, which states that quantity demanded will increase by less than 50 percent.

Assume the Demand for a Good Is Price Inelastic,i