When the price of a car is $25,000,car sales are 10,000 per month.When the price of a car increases to $29,000,car sales fall to 8,000 per month.Using the initial-value method,the demand for cars is
A) elastic.
B) inelastic.
C) unit elastic.
D) It is not possible to say based on the data given.

Question

Quizplus · Accepted Answer

The demand for cars is considered elastic because the percentage change in quantity demanded is greater than the percentage change in price. When the price increases by 16% (from $25,000 to $29,000), the quantity demanded decreases by 20% (from 10,000 to 8,000 cars), indicating a relatively high sensitivity of quantity demanded to price changes, which defines elastic demand.

When the Price of a Car Is $25,000,car Sales Are