Suppose the price of a good is $5 and quantity demanded is 10 units. When price increases to $6, quantity demanded decreases to 9 units. What does this indicate?
A) The quantity effect is larger than the price effect, indicating that demand is inelastic.
B) The quantity effect is larger than the price effect, indicating that demand is elastic.
C) The price effect is larger than the quantity effect, indicating that demand is inelastic.
D) The price effect is larger than the quantity effect, indicating that demand is elastic.

Question

Quizplus · Accepted Answer

The decrease in quantity demanded as a result of an increase in price, with a relatively small change in quantity compared to the change in price, indicates that demand is inelastic. This means consumers are not highly responsive to price changes.

Suppose the Price of a Good Is $5 and Quantity