If the price of oil increases by 50% but consumption decreases by 25%, then the demand for oil is elastic.

Question

Quizplus · Accepted Answer

The statement describes a situation of price elasticity of demand, but without knowing the percentage change in quantity demanded relative to the percentage change in price, we cannot determine if the demand is elastic or inelastic. The given information only states a decrease in consumption, not the percentage change in demand in response to the price change. Elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.

If the Price of Oil Increases by 50% but Consumption