If Euro T-Shirt Co. lowers its price from €6 to €5 and finds that students increase their quantity demanded from 400 to 600 T-shirts per month, then the demand for EuroT-shirts within this price range is
A) price inelastic.
B) price elastic.
C) unit elastic.
D) cross elastic.

Question

Quizplus · Accepted Answer

The decrease in price from €6 to €5 resulted in a 20% decrease in price, and a 50% increase in quantity demanded. This means that the price elasticity of demand is greater than 1, indicating that demand is price elastic within this price range.