A price elasticity of demand equal to _______ allows a greater markup than a price elasticity of demand equal to______ .

Question

Quizplus · Accepted Answer

A higher price elasticity of demand means that a small change in price leads to a large change in quantity demanded. This puts pressure on sellers to keep prices low, which limits their ability to markup prices. Conversely, a lower price elasticity of demand means that a change in price leads to a smaller change in demand. This gives sellers more flexibility to raise prices and increase their markup. Therefore, a price elasticity of demand equal to 1.6 allows a greater markup than one equal to 1.8.

A Price Elasticity of Demand Equal to _______ Allows a Greater